To Mr. Morrissey:
At the beginning, we great appreciate you to trust us to do this research for your business case. After analyzing the background and information you offered to our company, we did a large number of researches in your specific two products and the industry. At present, the quantitative production and demand of the wood stove are shrinking in the market because of the drastic competitive marketing. Otherwise, the marketing of owner is not significant in competition. Therefore, we are going to focus on wood stove, and offer two assumptions to help you make a decision about your business that you can either discontinue wood stove production and keep production of owner or continue the present production structure.
Overview: …show more content…

Now we try to change the output. Let ovens are expanded to 30,000 units and stoves are constrained to 15,000 units. From the Exhibit 5 that ovens are earned profit $583,000 after expand. Although stoves still lose more money after decrease the units, your company wins the profit $5000 eventually. Consequently, we recommend your company do the business for producing only one product---oven and produce the units in 30,000. For the stove, we just regret to you to shut down.

6. Only oven: : shows the costs and profits of ovens between the adjusted and unadjusted in 30,000 units.
Exhibit 6 Ovens(Adjusted Fixed Overhead) Ovens
Sale $10,500,000 $10,500,000
Cost of Good Sold 5,097,000 5,400,000
Gross Margin 5,403,000 5,100,000
Selling Cost 2,250,000 2,250,000
Shipping Cost 1,800,000 1,800,000
Sales Commissions (5%) 525,000 525,000
General Expense 245,000 245,000
Profit Before Tax $583,000 $280,000

Our proposal is adopting the adjusted ovens in 30,000 units for your company. By contrast, the sales are identical, but the costs of good sold are difference. The adjusted ovens are lower cost; the other is a little higher. Other costs are no change. We see that the