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Karibu Textile Mills at Mbagala is currently facing a problem on its packaging machine at the plant. Regarding the specific problem, there are 48 hours of manufacturing time to go before a scheduled shutdown for repairs. One of the machine‘s major parts has developed visible defects, which have not yet had any effect on production. However, it may suddenly fail at any time in the next 48 hours of production operations and, therefore, force an emergency shutdown

Based on these conditions, the production foreman can take one of the two alternatives. He can shut down the plant now and repair the machine on a planned basis, which will take four hours since servicemen are available. Alternatively, he can continue with production operations but run the risk of a sudden breakdown, which will require eight hours due to the need to call in the mechanics, make repairs and restart the machine. In both cases, production time is evaluated to be worth T.shs 100,000. Any lost time can be calculated by this hourly rate.

Experience with this packaging machine indicates that there are 8 chances in 10 in making it through the 48 hours of normal operation without a breakdown. On the other hand, there is a 0.99 probability of the machine holding up during the 48 hours after a shutdown for repairs now.

The Mwanamboka Manufacturing Company in Mwanza manufactures a product that it distributes through its own sales branches in the northern part of the country.

The company’s president, Mr. Maji Marefu was recently approached by a distributor from the eastern part of the country who showed interest in obtaining a franchise for distribution of the product in eastern part of the country which now is not served by the company. The distributor proposes that he will purchase the product from the Mwanamboka Manufacturing Company at a price of shs. 3,250 f.o.b. the Mwanamboka Manufacturing Company factory and offer it for sale to retailers at a price of shs.4,250.

The distributor would pay freight charges averaging shs. 350 per unit. No sales commissions would be paid on these sales. The product is now sold to retailers in Mwanamboka’s present market area at a price of shs.4,400 delivered. Sales commissions are computed at 5% of sales. Freight charges averages shs.150 a unit.Other selling and administrative costs are regarded as fixed and amount to shs.450 per unit.

Manufacturing costs amounts to shs. 2,950 per unit as follow:-

Manufacturing capacity will be adequate to handle the increased volume of the Eastern Zone order, which the company estimates would amount to 1,000 units a month. This additional order would bring about an increase of fixed factory overhead to the tune of shs. 150,000 per month.

REQUIRED: Should the Mwanamboka Manufacturing Company accept the arrangement suggested by the Eastern Zone distributor?

Eva Chambo runs a shop at Kiwalani - Dar - es - Salaam retailing Compact Discs (CD) which sell for Tshs. 4,950 each. Each CD costs the business Tshs 2,900 and there are other expenses attached to the sale, estimated to amount to Tshs 50 per CD. Eva is considering switching to a lower priced range of CD retailing at Tshs. 4,250 each. These CDs would cost Eva Tshs 2,700 each, with other expenses of Tshs 50 per CD as before. The annual expenses of the business for the coming year are estimated to be as follows:

The manager of the shop estimated the probabilities of different levels of sales demand in units as follows:

The Mukoko Manufacturing company produces and sells three product lines. Below is a profit and Loss Statement in summary form for six months period. The Mukoko Manufacturing Company Profit or Loss Statement in Summary Form for the 6 months ended 30^th June 2024

You are given additional information as follows:-

1. Cost of Goods sold include T.shs. 1,200,000 of fixed manufacturing overhead which has been allocated to the product lines as follows: -
   A: 40%
   B: 40%
   C: 20%
2. Selling expenses have been allocated to the product lines on the basis of sales orders. However, the variable selling expenses for each product line amount to 10% of sales shillings.
3. Administrative expenses are all fixed.

Management is concerned with the poor performance of product line C. During a discussion with the Sales Manager, the Managing Director of the Company expressed total dissatisfaction about the loss on product line C. The following alternative was discussed and explored: “Eliminate product C, maintain the present volume for product line A and B, and rent the unused production facilities for T.shs. 60,000 a month”.
Required:
Advice management on the best course of action to take.

Quick Print Ltd is proposing to introduce to the market a new type of laser printer. It has three possible models which reflect speed of printing and available fonts: Basic, Fast and Enhanced. (The model numbers are QP200B, QP500F and QP700E respectively). However the company has only sufficient capacity to manufacture one of this models. An analysis of the probable market acceptance of each of the three models has been carried out and the resulting profits estimated as follows:-

Required:

1. Using the maximum expected profit criterion, choose an appropriate model to introduce to the market.
2. Explain what is meant by the "expected value of perfect information". Calculate its value for this situation.

The Usambara Spinning Mill has two production departments; Machining and Assembly. The Machining department has a monthly capacity of 1,500 machine hours and the Assembly department a monthly capacity of 3,000 direct labour hours. The production capacity of either can be expanded within a period of 15 months.

At present the company makes 3 products all of which us the same machining and assembly facilities. The expected demand, unit selling price, the variable costs and the time which each unit takes in machining and assembly are provided below:-

The company has fixed overheads of shs. 200,000 per month.

The Dar es Salaam Lamp Factory produces a student reading table lamp Annual production is 10,000 lamps. Currently sales are 8,000 lamps per year. Per unit cost and revenue data are as follows:-

Variable overhead varies directly with direct labour hours and overhead rate equals the labour rate. Fixed overhead is applied at the rate of 100% of direct labour costs and sales commissions are 10% of the selling price. There are no sales commissions for special orders.
Required:
Treat each question below independently:

1. Suppose Dar es Salaam Lamp Factory receives a special order for 1,000 lamps from a new customer. This would not affect current sales. Compute the minimum price the factory should accept for this special order.
2. Suppose Dar es Salaam Lamps Factory receives a special order for 3,000 lamps from a new customer. If the order is accepted, it must be filled completely. Compute the minimum price the company should accept
3. Suppose that current excess capacity is used to repair lamps. The repair business generates a total contribution margin of shs. 300,000. It is estimated that the existence of the repair business increases sales of lamps by 2,000 units per year. If production exceeds 8,000 units, the repair business must be discontinued. How, if at all, would this affect your answers to part (a) and (b) above?