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Essay / Research Paper Abstract
This 4 page paper looks at an accounting case study provided by the student, Clear Hear have the opportunity to increase revenues with a new contract for 100,000 cellular telephones, but they only have spare capacity for 70,000. The paper looks at differentiation and costs for the options to determine if the firm should accept the contract and assess how it should be fulfilled. The calculations used are included in the paper The bibliography cites 3 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEclearcontract.rtf
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Unformatted sample text from the term paper:
is a telecommunications company manufacturing cellular phones; we will assume that their Main aim is one of profit maximization rather than revenue maximization. Two products are manufactured, the Alpha and
the Beta models. The current factory facility is currently operating under capacity, as Kendra has a remuneration package that is based on profitability there is additional motivation to maximise profits.
There is an opportunity to take-up a new contract involving the supply of 100,000 new alpha units, but these would need to be delivered in 90 days. This would
increased the firm revenues, but there are a few difficulties with this potential contract. The unit, which is the same as the alpha would not need any tooling up costs
as it is the same as that already produced, however the price offered is only $15 and the firm does not have capacity to produce all 100,000 and meet current
production schedules, there is only a spare capacity of 70,000. The assessment of the contract and its potential profitability needs to assess the way that the contract may be
fulfil, including looking at how the 30,000 over and above the existing capacity may be produced and supplied. Two options exist, either outsourcing or reducing the production of the beta
model to produce more alpha models. To assess this we need to compare the net contribution levels (after costs and opportunity costs) that each of the options will produce. This
is the best way to assess the most profitable options (Elliott and Elliott, 2008) The first stage is to look at the use of the spare capacity to assess the
increase in contribution that using this capacity would create with the price of $15. Table 1 Contrition for the first 70,000 units Revenue (price) per unit $15 Variable cost
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