U-Crack-Me-Up Windows, a Manufacturer of Windows, Is Experiencing a Bottleneck

question 185

Essay

U-Crack-Me-Up Windows, a manufacturer of windows, is experiencing a bottleneck in its plant.Setup time at one of its workstations has been identified as the culprit.A manager has proposed a plan to reduce setup time at a cost of $54,000.The change will result in 800 additional windows.The selling price per window is $180, direct labour costs are $60 per window, and the cost of direct materials is $95 per window.Assume all units produced can be sold.Required:
Determine the change in both contribution margin and throughput contribution from making the investment.Should the investment be made? Justify your answer.

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Definitions:

Equity Finance

A method of raising capital through the sale of shares in a company, representing ownership interests in the corporation.

Investment

The allocation of resources, typically money, into ventures, stocks, or assets with the expectation of generating a profit.

Types of Saving

Various forms in which individuals or entities can save their money, such as bank deposits, investments, or pension funds.

Corporate Bonds

Debt securities issued by corporations to fund their operations, expansions, or projects, carrying a promise to return the principal along with agreed-upon interest payments.