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Detroit Case

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1. In my mind, Wriston has two major decisions. First, Wriston must first decide if it wants to keep the Detroit plant open. Second, Wriston must decide if it will continue producing all of the product groups. When considering shutting down the Detroit plant, Wriston should probably evaluate the NPV (as Harvey pointed out) of the "no change" case versus the NPV of a shutdown case. Wriston may save fixed costs from shutting down Detroit, but may forego sales opportunities by not being able to meet demand. Another case could be a "build new plant" case.
2. The second decision is to decide if it will continue producing all of the product groups. I agree with Harvey's recommendation to drop Group 3. I calculated "Gross Profit" for Exhibit 7: $5,645 (group 1); $3299 (group 2); $654 (group 3); $9,600 (total). I defined gross profit as Profit before fixed mfg overhead. Also, I calculated gross profit as a % of sales: 41% (group 1); 36% (group 2); 6% (group 3); 28% (total). Some other thoughts... Wriston, as a company, must decide if it wants to continue sales of group 3 products. Wriston analysis must balance the financial benefits of dropping the group 3 products versus the potential negative backlash from customers. Wriston may want to include potential "lost opportunity" considerations in its analysis. If Wriston decides to KEEP group 3 products, it must then decide which plant should produce the products. Detroit is probably the plant of choice, but Wriston must recognize that the profitability of the group 3 product line will be inferior to the other product lines, irregardless of which plant manufactures the products.
3. Without group 3 products, Detroit's standalone profitability appears acceptable. I may have missed sometime, but I would not be inclined to sink major capital in the facility. I would run it as a "cash cow". Wriston should confirm this by

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