Westfield Corporation makes two different boat anchors—atraditional fishing anch

Question

Westfield Corporation makes two different boat anchors—atraditional fishing anchor and a high-end yacht anchor—usingthe same production machinery. The contribution margin of the yachtanchor is three times as high as that of the other product. Thecompany is currently operating at full capacity and has been doingso for nearly two years. Ralph Sampson, the company's CEO, want tocut back on production of the fishing anchor so that the companycan make more yacht anchors. He says that this is a“no-brainer” because the contribution margin of theyacht anchor is so much higher. Write a short memo to Ralph Sampson describing the analysisthat the company should do before it makes this decision and anyother considerations that would affect the decision. Westfield Corporation makes two different boat anchors—atraditional fishing anchor and a high-end yacht anchor—usingthe same production machinery. The contribution margin of the yachtanchor is three times as high as that of the other product. Thecompany is currently operating at full capacity and has been doingso for nearly two years. Ralph Sampson, the company's CEO, want tocut back on production of the fishing anchor so that the companycan make more yacht anchors. He says that this is a“no-brainer” because the contribution margin of theyacht anchor is so much higher. Write a short memo to Ralph Sampson describing the analysisthat the company should do before it makes this decision and anyother considerations that would affect the decision. Write a short memo to Ralph Sampson describing the analysisthat the company should do before it makes this decision and anyother considerations that would affect the decision.

Explanation / Answer

     2.   Eliminate costs andbenefits that do not differ between alternatives

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