INTRODUCTION

FinePrint Company prints high-quality color

brochures in its Charlottesville, Virginia.
Johnson, owner of FinePrint company is presented
with few opportunities to consider:
Special order (Abbie Jenkins requested special
order of 25000 brochures)
Outsourcning opportunity (Small Print Shop,
offered its resources for outsourcing its brochure
printing services)

The Case A
Question 1: FinePrint currently is
operating at around full capacity:
150,000 brochures. Should Johnson
accept the special order?

THE A CASE

THE A CASE

Option 1: Do not accept special order

Option 2: Accept special order

From the calculation, it can be concluded that Johnson should not accept
the special order. The income would be $1500 lower if FinePrint accepts the
special order. In addition, FinePrint should select the option which has the
greatest contribution margin.

The Case A
Question 2: Assume that monthly printing
capacity is 200000 brochures, current monthly
production is 150000 brochures, and operating
costs at the 150000 level are as presented in
case Exhibit 1. Also assume that this order
would not affect any of FinePrint's cuurent
business with regular customers. Should
Johnson accept the special order?

Option 1: Do not accept special order

Option 2: Accept special order and produces 175000 (150000 + 25000)

*$28000 = (0.17 x 150000) + (0.10 x 25000)

In this case, FinePrint should accept the

special order. FinePrint could generates
an additional of $1000 if it accepts the
special order.

The B Case
Should FinePrint outsource 30000 brochures to
SmallPrint?

FinePrint should not outsource the 30,000 brochures to

SmallPrint. This is because outsourcing would incur $600
additional cost.

The C Case
If FinePrint could print the special order for Jenkins, should
FinePrint outsource 25000 brochures to SmallPrint?

*2000 = $25000 x $0.08

From the above calculation, it can be
concluded that FinePrint can take the
special order and should outsource. It
would generate an additional of $500
operating income.

THANK YOU