Case Solution 7n1z

SOLUTION FOR BW MANUFACTURING COMPANY CASE VENKATARAMAN 1445646

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Based on the operating budget - income statement of BW Manufacturing Company, we see that the Income before tax (EBT) is $6,680,000 and Net Income after 35% tax is $4,342,000. Analysis of the 4 options available with BW Manufacturing Co.: Option 1: Involves dropping Grill A from their product range. This in turn causes loss of $840,000 in IBT along with a loss of $7,520,000 in contribution margin. This shows that Option 1 is not the best way to go be profitable!  Option 2: Involves lowering price of Grill C to $75 and increasing quantity of Grill C by 20,000 units. This results in an increase of IBT and contribution margin by $180,000. Option 2 seems to be feasible when it comes to increasing profitability!

 Option 3: Involves increasing quantity of Grill C by 10,000 units and decreasing quantity of Grill A by 10,000 units. This results in a loss in total contribution margin and IBT by $300,000. This shows that Option 3 is not the best way to go be profitable!  Option 4: Involves lowering price of Grill C to $75 and increasing quantity of Grill C by 30,000 units and decreasing quantity of Grill A by 10,000 units. This results in a loss in total contribution margin and IBT by $170,000. This shows that Option 4 is not the best way to go be profitable!

Upon this detailed analysis, I conclude that the owner’s decision to go with Option 2 is correct. ing documents are enclosed for review.