Turnhilm,Inc

question 94

Essay

Turnhilm,Inc.is considering adding a small electric mower to its product line.Management believes that in order to be competitive,the mower cannot be priced above $139.The company requires a minimum return of 25% on its investments.Launching the new product would require an investment of $8,000,000.Sales are expected to be 40,000 units of the mower per year.
Required:
a)Compute the target cost of a mower.
b)Suppose the target cost calculated in part (b)above is not attainable using the company's current manufacturing facilities.Specifically,the average cost of producing the 40,000 units is $100 per unit.Besides abandoning the idea,what specific options are available to Turnhilm?
c)Suppose,using the company's current manufacturing facilities the average cost of producing the 40,000 units is only $80.What other specific options are available to Turnhilm?

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Definitions:

Primary Activities

The fundamental actions or processes that are directly involved in creating and delivering a product or service to customers.

Value Chain

A model that describes the full range of activities needed to create a product or service, from conception to delivery.

Human Resource Management

involves recruiting, hiring, deploying, and managing an organization's employees.

Value Chain

A series of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.