Imagine you are a manager of a snack food company. You need to decide whether you should manufacture a new mozzarella cheese curl or purchase it from another manufacturer and re-sell it to your customers. Consider the details below: You've already spent $150,000 on research and development costs to produce this new product in house. • Whether you manufacturer the cheese curl or buy from another manufacturer, you plan to support this new product with $75,000 in advertising and promotions. • If you decide to manufacturer the product, you would need to hire a line manager ($60,000 annual salary) Whether you manufacturer the cheese curl or buy from another manufacturer, you would still need to pay rent on the factory ($$72,000 annually) If you decide to manufacturer the product, raw materials and packaging would cost $0.50 per bag. • If you purchase or manufacture the product, you would need to pay a sales representative $0.05 per bag in sales commissions. If you purchased the product from another manufacturer, each bag would cost $0.65. Considering the factors above, which are relevant to your decision? Which ones are irrelevant? For each, explain why it is relevant or irrelevant in this specific decision. Please number your responses (1-7)
Imagine you are a manager of a snack food company. You need to decide whether you should manufacture a new mozzarella cheese curl or purchase it from another manufacturer and re-sell it to your customers. Consider the details below: You've already spent $150,000 on research and development costs to produce this new product in house. • Whether you manufacturer the cheese curl or buy from another manufacturer, you plan to support this new product with $75,000 in advertising and promotions. • If you decide to manufacturer the product, you would need to hire a line manager ($60,000 annual salary) Whether you manufacturer the cheese curl or buy from another manufacturer, you would still need to pay rent on the factory ($$72,000 annually) If you decide to manufacturer the product, raw materials and packaging would cost $0.50 per bag. • If you purchase or manufacture the product, you would need to pay a sales representative $0.05 per bag in sales commissions. If you purchased the product from another manufacturer, each bag would cost $0.65. Considering the factors above, which are relevant to your decision? Which ones are irrelevant? For each, explain why it is relevant or irrelevant in this specific decision. Please number your responses (1-7)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Imagine you are a manager of a snack food company. You need to decide whether you should manufacture
a new mozzarella cheese curl or purchase it from another manufacturer and re-sell it to your customers.
Consider the details below:
You've already spent $150,000 on research and development costs to produce this new product in
house.
•
Whether you manufacturer the cheese curl or buy from another manufacturer, you plan to support
this new product with $75,000 in advertising and promotions.
• If you decide to manufacturer the product, you would need to hire a line manager ($60,000 annual
salary)
Whether you manufacturer the cheese curl or buy from another manufacturer, you would still need
to pay rent on the factory ($$72,000 annually)
If you decide to manufacturer the product, raw materials and packaging would cost $0.50 per bag.
• If you purchase or manufacture the product, you would need to pay a sales representative $0.05
per bag in sales commissions.
If you purchased the product from another manufacturer, each bag would cost $0.65.
Considering the factors above, which are relevant to your decision? Which ones are irrelevant? For each,
explain why it is relevant or irrelevant in this specific decision. Please number your responses (1-7)
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