Berkshire Threaded Fasteners Company

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Berkshire Threaded Fasteners Company had three product lines: the 100 series, the 200 series, and the 300 series. In 1973, Joe Magers hired Cook to help him to manage the company. After reviewing the report, Magers planned to drop 300 Series product line and reduced cost of 200 series. However, Cooked continued producing the three lines, and the report showed in the first half of 1974 was modestly successful. In July 1974, Cook and Magers had another problem need to solve: Their big competitor, Bosworth Machining Company lowered price from $2.45 to $2.25 per pieces on the product of 100 series. So, the two main discussions involved: should the company drop 300 series product line, and reduce the 100 series product selling price. Cook decided to continue producing the 300 series which he made the right decision. From the report showed on Exhibit3, some costs are variable cost but some costs are no variable costs. It means no matter the company produces or not produces, the company still needs to expense some fix costs such as rent, machine depreciation, equipment loan interest and other factory costs. From the profit and loss statement showed on Exhibit4, we can see the total cost for not producing 300 series was $95 of rent +$186 of depreciation+$ 56 of other factory costs + $27 of interest= $ 364. The loss of $364 is more than the loss of $111 by continuing to produce the 300 series. So, keeping producing the product is the right way. After discussing the pricing problem, Magers want to keep the 100 series price for $2.45, which is right. Even though the sales volume would increase to 1,000,000 from 750,000 by reducing the selling price from $2.45 to $2.25 per 100 pieces, the company would not make profit. Since the cost per 100 pieces for 100 series is $2.29, which bigger than $2.25. If the company sold at $2.25, the company lost money. Also, in the short run,
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