Blackheath Manufacuring

Blackheath Manufacturing, Mr.Lee High, Mr. Blackheath

Lee High thought that this would be an ideal time to do some cost analysis on the Great Health. Based on the data for three weeks' production cost he felt it would be wanted to develop some equations which might be useful for managerial decision making. From such equations it seemed that break-even volume could be generated. Since production was unusually based on orders actually received and since products were shipped immediately upon completion, inventories of work-in- process and finished goods were practically nonexistent. When talking to the salesman Lee discovered that on typical orders the selling price of Great Health was $7.00. during lunch one day, Lee was told by the president that office expenses including certain selling items were fixed at $781 per week

The next day Charlton Blackheat sent a memo to the salesman and other who were involved in pricing Great Health. Among other things the memo stated, "Everyone should study Mr. High's char, especially the decision rules he has generated through complex cost accounting procedures. From now on, all pricing decisions will follow these rules and under no condition will we price at less than 10% above our delivery cost.