Gimble Manufacturing Inc

question 195

Essay

Gimble Manufacturing Inc.makes vibration control springs for heating, ventilating, and air conditioning (HVAC)equipment.Materials cost $52 per spring set, and the machinists are paid $44 per hour.A machinist can produce four sets of springs per hour.Fixed manufacturing costs for springs are $5,000 per period.Non-manufacturing spring set costs are fixed at $11,000 per period.Each spring set sells for $75 and Gimble sells on average 4,000 spring sets per period.Required:
a.Competition has entered the market and is selling spring sets for an introductory price of $66.Can Gimble Manufacturing Inc.meet this price and still make a profit?
b.How would your answer to requirement a.change if Gimble sells on average 8,000 spring sets per period.
c.What should Gimble Manufacturing Inc.'s management do in the short-run and for the long-term if it appears that $66 is going to be the new market price for the future.

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Definitions:

Invoice

A document issued by a seller to a buyer that specifies the products or services provided and the amount owed.

Discount

A reduction in the price of goods or services, usually to encourage sales or to reward customers.

Payment Terms

Conditions under which a payment is to be made, including the timeframe and method of payment.

Paid

The act of transferring money or compensation for services rendered or goods received.