Bw Manufacturing Company

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BW Manufacturing Company Gas Grills- Grills A B C Industry dominated by Weber, Ducane, Coleman, Sunbeam and Holland—dozen types of grills, smokers, cooking kettles BWM is a small player A small manufacturer of gas grills is making final changes to its 2009 operating budget and considering several changes in pricing, advertising, and product availability. This short case addresses the topic of contribution analysis as an easy way to analyze profit planning issues such as adding or dropping a product or service; changing a price; adding or decreasing expected volumes; or preparing a profit budget. In this situation there are three products, each with different proportions of variable and fixed costs. The product with the highest profit/unit on a full cost basis has the lowest contribution/unit on a variable cost basis, and vice versa. Four different marketing plans are proposed before one is finally adopted as the plan for the year. At year end, the actual results can be compared to the budget and to a flex or adjusted budget based on the actual product volumes realized. The numbers are simple and the students can readily see the benefit of variable costing. 1. Should BW drop Grill A? what’s the impact Assume that the volumes and selling prices of the other 2 products would be the same whether or not Grill A product line was dropped 2. Should BW lower the price of Grill C? The owners wanted to know the impact if they lowered the price of Grill C to $75 and if doing so let to 20,000 unit increase in sales of Grill C 3. Should BW change its advertising focus? The owners wanted to know the impact of 10,000 unit increase in Grill C volume and a related 10,000 unit decrease in grill A volume because of a shift in advertising emphasis 4. Should BW lower the price of Grill C and change its advertising focus? The owners wanted to know the impact of lowering

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