The Brandt Corporation makes wire harnesses for the aircraft industry. Brandt is uncertain about when and how many customer orders will be received. The company makes harnesses only after receiving firm orders from its customers. Brandt has recently purchased a new machine to make two types of wire harnesses, one for Boeing airplanes (B7) and the other for Airbus Industries airplanes (A3). The annual capacity of the new machine is 6,000 hours. The following information is available for next year:
1. Calculate the average manufacturing lead times per order (a) if Brandt manufactures only B7 and (b) if Brandt manufactures both B7 and A3.
2. Even though A3 has a positive contribution margin, Brandt’s managers are evaluating whether Brandt should (a) make and sell only B7 or (b) make and sell both B7 and A3.
Which alternative will maximize Brandt’s operating income? Show your calculations.
3. What other factors should Brandt consider in choosing between the alternatives in requirement 2?