In: Accounting
ABCD Company is a toy manufacturing firm. It estimates that it will produce 20,000 toy trucks during the coming year that will each use .025 gallons of paint at $30 per gallon. ABCD Company purchased 500 gallons but only used 490 gallons to actually produce 24,500 toy trucks. The total price for paint was $17,000. In addition, the company expects each truck to use 1.5 hours of labor at a cost of $7.00 per hour. However, at the end of the year it was determined that a total of 37,975 hours were used at a cost of $6.80 per hour.
Q: Management implemented a new strategy with respect to inputs. The new strategy involved a decision to invest in higher quality inputs. Evaluate management’s strategy.