Understanding the Numbers: 1. Study Exhibits 1, 2, and 3 and answer the following: a. What is the per ton cost of ductile iron casting at the Lynchburg Plant? At the Archer Creek Plant? At the Radford Plant?
b. What percentage of ductile iron can be recycled (i.e. ductile iron return that is generated) from each charge at the Lynchburg Plant? At the Archer Creek Plant? At the Radford Plant?
c. What is the average percent of ductile iron return in the total raw material used in a…show more content… Had much difficulty here!
Implementing the Decision to Transfer: 5. Describe the principal-agent relationship that is part of the ductile iron return transfer decision at the Lynchburg Foundry. (Identify the principal and the agents and explain why each may have conflicting goals).
* It would appear that Martin Peterson, materials manager for Lychburg Foundry, is the principle in this relationship. Those responsible for production at each individual plant (Lynchburg, Archer Creek & Radford) would be assuming the role of the agent in the relationship. The principle in this relationship is analyzing the best way to steward the materials needed in all of the plants, so that the Lynchburg Foundry Company will meet all of its obligations. However, the agents are concerned mostly with the production of their respective plants. So there may be times when the principle has to impose some constraints on the agents.
6. Assume the decision to ship excess ductile iron return from the castings plants to the pipe-making plant is to be implemented. h. What are the three possible transfer prices that Mr. Peterson is considering? * The three possible transfer prices that Mr. Peterson is considering are: * No cost at all except for freight, $175/ton, * The estimated production costs $194.91/ton * Or $189.25/ton for Lynchburg and Archer Creek respectively.
