"Easton Corporation makes two diverse boat anchors - a traditional fishing anchor and a high-end yacht anchor - using the similar production machinery. The contribution margin of the yacht anchor is 3 times as high as that of the other product. The company is presently operating at full capacity and has been doing so for nearly two years. Bjorn Borg, the company's CEO, want to cut back on production of the fishing anchor so that the company will make more yacht anchors. He says that this is a "no-brainer" because the contribution margin of yacht anchor is so much higher."
(Weygandt, Kimmel, & Kieso, 2012).
Prepare a page memo to Bjorn Borg explain the analysis that the company should perform. Be sure to address the subsequent in your analysis:
• what role might contribution margin for each unit of limited resource play in this decision?
• Should marketing department be involved in decision-making process? How important is consumer demand?
• Should the company think expanding their production facilities or purchasing additional equipment?
• How might this change influence their company brand or the customer's perception of their brand? Will they be appealing to a different market by offering yacht anchors?