Case | HBS Case Collection | September 1990 (Revised June 1994)

Catawba Industrial Co.

by Francis Aguilar

Abstract

A department general manager has to decide whether or not to add a lightweight compressor to the line, what price to charge, and what volume to produce. The analysis requires maximizing contribution in a situation where one factor is constrained. As such, it takes into account opportunity costs and shadow prices as well as fixed and variable costs, demand curve analysis, and sunk costs. Also invites discussion about the proper measurement, offering departmental profits and return on sales as candidates.

Keywords: Cost vs Benefits; Capital Budgeting; Business Earnings; Cost Accounting; Cost Management; Asset Pricing;

Citation:

Aguilar, Francis. "Catawba Industrial Co." Harvard Business School Case 191-053, September 1990. (Revised June 1994.)