Anton Valve Company Produces a Mechanical Valve Used in Water

question 118

Essay

Anton Valve Company produces a mechanical valve used in water systems.Three years ago the company introduced an electronic version of the valve.Sales of the mechanical model have steadily declined,and the company will report a loss on the product this year as follows:
$\begin{array}{lr}\text { Sales revenue } & \$ 200,000 \\\text { Less costs: } \\\text { Unit-level manufacturing costs } & \$ 157,500 \\\text { Batch-level costs } & 2,500 \\\text { Product-level costs } & 5,000\\\text { Facility-level costs } & 30,000 \\\text { Allocated corporate costs } & \underline{11,500} \\\text { Total costs } &\underline{ 206,500}\\\text { Net loss } &\underline{ \$(6,500)}\end{array}$ If production of the mechanical valve is discontinued,product-level costs will be eliminated but facility-level and corporate costs would not be affected.
Required:
1)Prepare a quantitative analysis that indicates whether the valve should be discontinued.
2)What qualitative factors should be considered in this decision?

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