Gimble Manufacturing Inc. makes vibration control springs for heating, ventilating, and air conditioning (HVAC) equipment. Materials cost $52 per spring set, and the machinists are paid $44 per hour. A machinist can produce four sets of springs per hour. Fixed manufacturing costs for springs are $5,000 per period. Non-manufacturing spring set costs are fixed at $11,000 per period. Each spring set sells for $75 and Gimble sells on average 4,000 spring sets per period.
Required:
a. Competition has entered the market and is selling spring sets for an introductory price of $66. Can Gimble Manufacturing Inc.meet this price and still make a profit?
b. How would your answer to requirement a. change if Gimble sells on average 8,000 spring sets per period.
c. What should Gimble Manufacturing Inc.'s management do in the short-run and for the long-term if it appears that $66 is going to be the new market price for the future.

Question

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The Answer of Gimble Manufacturing Inc. makes vibration control springs for heating, ventilating, and air conditioning (HVAC) equipment. Materials cost $52 per spring set, and the machinists are paid $44 per hour. A machinist can produce four sets of springs per hour. Fixed manufacturing costs for springs are $5,000 per period. Non-manufacturing spring set costs are fixed at $11,000 per period. Each spring set sells for $75 and Gimble sells on average 4,000 spring sets per period.
Required:
a. Competition has entered the market and is selling spring sets for an introductory price of $66. Can Gimble Manufacturing Inc.meet this price and still make a profit?
b. How would your answer to requirement a. change if Gimble sells on average 8,000 spring sets per period.
c. What should Gimble Manufacturing Inc.'s management do in the short-run and for the long-term if it appears that $66 is going to be the new market price for the future.