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INTRODUCTION
FinePrint Company prints high-quality colorbrochures in its
Charlottesville, Virginia.
Johnson, owner of FinePrint company is presentedwith few
opportunities to consider:
Special order (Abbie Jenkins requested specialorder of 25000
brochures)
Outsourcning opportunity (Small Print Shop,offered its resources
for outsourcing its brochureprinting services)
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The Case A
Question 1: FinePrint currently isoperating at around full
capacity:
150,000 brochures. Should Johnson
accept the special order?
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THE A CASE
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THE A CASE Option 1: Do not accept special order
Option 2: Accept special order
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From the calculation, it can be concluded that Johnson should
not acceptthe special order. The income would be $1500 lower if
FinePrint accepts thespecial order. In addition, FinePrint should
select the option which has thegreatest contribution margin.
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The Case A
Question 2: Assume that monthly printingcapacity is 200000
brochures, current monthlyproduction is 150000 brochures, and
operatingcosts at the 150000 level are as presented incase Exhibit
1. Also assume that this orderwould not affect any of FinePrint's
cuurentbusiness with regular customers. ShouldJohnson accept the
special order?
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Option 1: Do not accept special orderOption 2: Accept special
order and produces 175000 (150000 + 25000)
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*$28000 = (0.17 x 150000) + (0.10 x 25000)
In this case, FinePrint should accept thespecial order.
FinePrint could generates
an additional of $1000 if it accepts the
special order.
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The B Case
Should FinePrint outsource 30000 brochures to
SmallPrint?
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FinePrint should not outsource the 30,000 brochures to
SmallPrint. This is because outsourcing would incur $600
additional cost.
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The C CaseIf FinePrint could print the special order for
Jenkins, should FinePrint outsource 25000 brochures to
SmallPrint?
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*2000 = $25000 x $0.08
From the above calculation, it can beconcluded that FinePrint
can take the
special order and should outsource. It
would generate an additional of $500
operating income.
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THANK YOU
