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Tecumseh Products Company has its headquarters in Tecumseh, Michigan. It describes itself as “a global multinational corporation producing mechanical and electrical components essential to industries creating end-products for health, comfort, and convenience.” The following was excerpted from the management discussion and analysis section of a recent annual report.
TECUMSEH PRODUCTS COMPANY
Management Discussion and Analysis
The company has invested approximately $50 million in a scroll compressor manufacturing facility in Tecumseh, Michigan. After experiencing setbacks in developing a commercially acceptable scroll compressor, the Company is currently testing a new generation of scroll product. The Company is unable to predict when, or if, it will offer a scroll compressor for commercial sale, but it does anticipate that reaching volume production will require a significant additional investment. Given such additional investment and current market conditions, management is currently reviewing its options with respect to scroll product improvement, cost reductions, joint ventures and alternative new products.
Instructions
Discuss issues the company should consider and techniques the company should employ to determine whether to continue pursuing this project.
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Chapter 12 Solutions
Managerial Accounting: Tools for Business Decision Making
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