Premium Essay

Blackheath Manufacturing Company

In: Business and Management

Submitted By philominalighter
Words 1192
Pages 5
SUMMARY Blackheath Manufacturing Company produces a single product called Great Heath. The company recently employed a new cost accountant, Lee High, who aims to make another cost analysis over a period of three production weeks. He needed to determine the variable, semi-variable and fixed costs connected with the Great Heath production. Once it been categorized, he determined the cost per unit to break-even. The case shows Lee High was considering variable and fixed costs in determining the cost of goods sold per unit. He able to develop decision rules for the company’s owner, Charlton Blackheath, for the management decision-making. Based on Lee High’s information, Mr. Blackheath stated that an order could not be less than $7.00 per unit and additional sales decision rules for sales agent with commission and direct sales has no commission. The case then shows a series of sales description that were accepted or declined followed on these decision rules. However, a young file clerk decided to take a special order which is under-bid at $5.50 for 100 units of Great Heath based on her own assumption that this would be profitable for that volume. A later sales cost report was developed by Lee High showing cost per unit based on his predetermined costs analysis and profit per unit. Data showed the special order contribute a subsequent loss because of too low sales price per unit. Therefore, Mr. Blackheath fired the clerk for her error and mistake and set a new commission plan based together with adjustment of price per unit to $8.00 targeting to generate a higher profit. From this case, there is one issue that have been recognised, that is about one time special order that made by the clerk. The clerk, Adelaide Ladywell was fired because mistakes that have been done. So, here we want to justify whether Ladywell’s decision was reasonable or not.

QUESTION 1
Develop…...

Similar Documents

Premium Essay

Browning Manufacturing Company Case

...136 - $ 172,200 $ 811,000 $ 1,129,200 352,368 - + $ $ 2,112,400 $ 1,901,952 $ Materials + $ $ $ 110,520 $ 825,000 935,520 $ 1,512,000 (210,448) - - + - + - - + - - + - - + 811,000 811,000 $ 124,520 Direct Manufacturing Labor + $ - 492,000 Factory Overhead Indirect Manufacturing Labor + $ 198,000 Power, heat & light + $ 135,600 Social Security Taxes + $ 49,200 Prepaid Taxes & Insurance, factory + $ $ - 66,720 $ 78,000 52,800 $ 144,720 $ Supplies 52,800 $ + $ $ - 17,280 $ 66,000 91,920 61,200 $ 83,280 $ Plant & Equipment + $ 2,678,400 $ $ 144,000 $ 61,200 $ 22,080 907,200 140,400 $ 2,822,400 $ 1,047,600 $ 1,774,800 $ 288,360 $ 552,840 $ 58,000 $ 862,136 $ 58,000 Browning Manufacturing Company Statement of Cost of Goods Sold (Schedule 1) For the Year ended December 31, 1998 Finished goods inventory 1/1/98 Work in process inventory 1/1/98 Materials used Plus: Factory expenses Direct Manufacturing Labor Factory overhead Indirect manufacturing labor Power, heat and light Depreciation of plant Social Security Taxes Taxes and insurance, factory Supplies Less: Work in process inventory 12/31/98 Cost of goods manufactured (completed) Less: Finished goods inventory 12/31/98 Cost of goods sold COST OF SALES AND......

Words: 1571 - Pages: 7

Premium Essay

Shipper Manufacturing Company

...Shipper Manufacturing Company 1. What objectives should be adopted in manufacturing with respect to cost, delivery, quality and flexibility? Given the facts, it is critical for the Shipper Manufacturing Company to have a vision to become the leader in the market or niche that the company is focusing its market focus on. Additionally, it may adopt a strategic goal to attain the Malcolm Baldridge Award or compliance with applicable International Organization for Standardization requirements within a defined period of time. specifications into the product engineering process by doing a 'House of Quality' exercise. Also, the company has a vertical organization that may add additional cycle time and lead to miscommunication of customer desires and corporate initiatives. They need a horizontal organization that can adapt quickly to the ever-changing demands of the customer and react immediately to change. The Shipper Manufacturing Company should hold a 'Voice of the Customer' exercise where both internal and external customer requirements and expectations are brainstormed and communicated. Additionally, the company should ensure customer satisfaction and incorporate customer In order for the Advanced Products division (ADP) of Shipper to match its new business strategy, the company will need to adopt new objectives. Shipper will gradually shift from a low-volume, custom designed product to a high-volume, continuous product. The current products are 100% customer designed,......

Words: 645 - Pages: 3

Premium Essay

Superior Manufacturing Company

...18 What recommendations, if any, would you make to waters regarding the company’s cost accounting system and its related reports? 19 Initial Analysis of Superior Manufacturing Company Case :- 1) After death of Richard Harvey (2004), founder and president of Superior Manufacturing Company (SMC), Paul Harvey took over. Paul Harvey had only 4 years of experience. Soon followed serious management problems because of some bad decisions made by Paul Harvey. The income statement of 2004 reflected net loss of $0.68million in a good business year. To solve this problem Herbert Waters was brought over as General Manager of SMC. 2) SMC manufactured 3 different products namely 101, 102, 103 and was among the top 8 companies in the industry. Samra Company was market leader and announced price annually and other follow. Due to no product differentiation price cut was not an option. The June 2004 market share of SMC product wise is given below; Products 101 102 103 Market share 12% 8% 10% Price per 100lbs 24.5 25.8 27.5 3) SMC had a dedicated factory concept, where each factory produces only one product. Each product factory was fully horizontally integrated. SMC all plants operated below capacity. 4) SMC followed a simple cost system, which identified two categories of cost :- a. Direct Cost to manufacturing of specific product (direct labour, materials, suppliers, retailers) b. Indirect Cost (rent, property taxes, material cost etc.) 5) As SMC product was sold in......

Words: 4716 - Pages: 19

Premium Essay

Superior Manufacturing Company

...POLITECNICO DI MILANO Master of Science in Management, Economics and Industrial Engineering [pic] Management Control Systems Prof. Paolo Maccarrone Second Assignment: Superior Manufacturing Company Analysis Group Ferrario Andrea 709407 Rognoni Susanna 720851 Taiana Marco 672497 Trifonov Angel 720619 A.Y. 2007/2008 Contents Q1.Do you agree with Water’s decision to keep product 103? 3 Analysis of the P&L statement of 31 December 2004 3 Sensitivity analysis 5 Strategic scenarios 9 Q2. Should Superior lower as of January 1, 2006 its price of product 101? To what price? 11 Q3. Why did Superior improve profitability during the period January 1 to June 30, 2005? How useful was the data in exhibit 4 for the purpose of this analysis? 14 Revenues 15 Costs 15 Q4. Why is it important that Superior has an effective cost system? What is your overall appraisal of the company’s cost system … 19 Why is it important that Superior has an effective cost system? 19 What is your overall appraisal of the company’s cost system and its use in report to management? 19 List the strengths and......

Words: 7176 - Pages: 29

Premium Essay

Malard Manufacturing Company

...Synthesis Malard Manufacturing produces a standard line of control valves that are price competitive in the industry. Currently they are faced with problems as to the delay in the production of their item CV305. Various departments in the company have conflicting views on how the product should be developed. Because of these differences the product cannot be completed and out for distribution on time and consumers have gone to the competition to purchase the similar item. Point of view Ms. Crandell’s point of view will be taken since she is the executive vice president of the company and she has been notified of the current problem. Statement of the Problem • What actions should Ms. Crandell take to resolve the internal problems of production and get the CV305 ready for distribution on time? Statement of Objectives • To come up with viable solutions for the current problem of slow product development and differences between departments • To set up a new sequence for the company’s product development Areas of Consideration • The cause for the delay in product development. • The differences in the departments views on product development. • There should be someone to lead all departments in developing a product. • Current market trends, technology. Discussion of Framework In this case it would be more appropriate to apply the inward structure of multistream form of organization design. Since there is no apparent order in the company in......

Words: 583 - Pages: 3

Premium Essay

Manufacturing Companies

...Collaboration in Supply Chains – A Survey of Swedish Manufacturing Companies Erik Sandberg Logistics Management Department of Management and Economics Linköpings universitet, SE-581 83 Linköping © Erik Sandberg, 2005 LiU-Tek-Lic-2005:35, Thesis No. 1180 ISBN: 91-85299-80-4 ISSN: 0280-7971 ISSN: 1402-0793 Printed by: UniTryck, Linköping Distributed by: Linköpings universitet Department of Management and Economics SE-581 83 Linköping, Sweden Tel: +46 13 281000, fax: +46 13 281873 Abstract The purpose of this thesis is to describe logistics collaboration in supply chains. During the past two decades, a new trend towards integration and collaboration in supply chains has been recognised among researchers as well as among business practitioners. This philosophy is called supply chain management and has received enormous attention in logistics research. Collaboration based on supply chain management is expected to reduce total cost and improve service towards the supply chain’s end customers at the same time. The argumentation in existing literature is however seldom underpinned by more rigorous empirical material and becomes therefore conceptual and superficial. Furthermore, it is incongruous about what actually is done when companies collaborate and what more specific effects are achieved. Therefore more research, especially survey based, is needed in order to verify existing literature. In this thesis the perspective of a focal company is taken in order to......

Words: 54358 - Pages: 218

Premium Essay

Superior Manufacturing Company

...Superior  Manufacturing  Company     Description   Superior   manufacturing   company   produces   three   kinds   of   industrial   products   (101,102   and   103)   in   its   own   dedicated   factories.   It   uses   a   job   costing   system   helping  to  evaluate  and  arrange  the  whole  process  of  production,  which  is  later   replaced   by   a   standard   cost   system   in   2005.   In   the   market   of   similar   products,   Superior   faces   seven   competitors,   one   of   which   is   the   dominant   company   Samra,   a   price-­‐maker   to   some   extent.   As   shown   in   the   figure,   Superior   suffered   a   loss   during   2004.   What   is   worse,   a   weakened   industry   and   some   other   problems   like   price  reduction  are  coming  in  the  following  years.     Problems  and  issues   In   terms   of   management   changes   and   other   reasons,   Superior   suffered   a   big   loss   even   during   an   optimistic   business   year.   It   is   obvious   situation   didn’t   change   better  in  the  next  year. ......

Words: 469 - Pages: 2

Premium Essay

Milton Manufacturing Company

...Milton Manufacturing Company Milton Manufacturing Company produces a variety of textiles for distribution to wholesale manufacturers of clothing products. The company’s primary operations are located in Long Island City, New York, with branch factories and warehouses in several surrounding cities. Milton Manufacturing is a closely-held company. Irv Milton is the president of the company. He started the business in 1999 and it grew in revenue from $500,000 to $5.0 million in ten years. However, the revenues declined to $4.5 million in 2010. Net cash flows from all activities also were declining. The company was concerned because it planned to borrow $20 million from the credit markets in the fourth quarter of 2011. Irv Milton met with Ann Plotkin, the chief accounting officer (CAO), on January 15, 2011, to discuss a proposal by Plotkin to control cash outflows. She was not overly concerned about the recent decline in net cash flows from operating activities because these amounts were expected to increase in 2011, as a result of projected higher levels of revenue and cash collections. Plotkin knew that if overall capital expenditures continued to increase at the rate of 26 percent per year, Milton Manufacturing probably would not be able to borrow the $20 million. Therefore, she suggested establishing a new policy to be instituted on a temporary basis. Each plant’s capital expenditures for 2011 would be limited to the level of capital expenditures in 2009. Irv Milton......

Words: 1484 - Pages: 6

Premium Essay

Superior Manufacturing Company

... Master of Science in Management, Economics and Industrial Engineering [pic] Management Control Systems Prof. Paolo Maccarrone Second Assignment: Analysis Group Ferrario Andrea Rognoni Susanna Taiana Marco Trifonov Angel A.Y. 2007/2008 Q1.Based on the 2004 statement of profit and loss data (Exhibits 1 and 2), do you agree with Water’s decision to keep product 103? In order to support an opinion on the side we decided to analyze all the probable scenarios. If the company management decided that it is better to stop the production of product 103, they could do this in one of the following manners: 1. Stop production and any business related to product 103. 2. Stop production but outsource it to another company and continue the distribution. 3. Stop production and use the available production capacity in order to produce product 101 or 102. If the company management decided that it is better to continue the production of product 103, they could do this in one of the following manners: 1. Maintain the same volume of production. 2. Increase the volume of production. 3. Lower the volume of production. 4. Substitute 102 production capacity with 103 if the 103 facility has not sufficient capacity to exploit economies of scale Analysis of the P&L statement of 31 December 2004 If we have a look at the P&L statement for the 2004 it is obvious that product 103 is......

Words: 5438 - Pages: 22

Premium Essay

Blackheath Manufacturing Company

...BLACKHEATH MANUFACTURING COMPANY SUMMARY Blackheath Manufacturing Company is a company that manufactures a single product named Great Heath. The Company recently hired a new cost accountant, Lee High, who intends to conduct a new cost analysis over a period of three production weeks. Lee wanted to better identify the fixed, variable, and semi-variable costs associated with production of Great Heath. Once these costs were categorized Lee could determine how this would affect the cost of goods sold. Lee could then develop what the break- even volume that could be generated from a changing volume of sales. The case shows the assumptions that Lee High made with respect to variable as versus fixed costs in determining the cost of goods sold per unit. Lee High was able to develop decision rules for use by the company’s owner for management decision-making purposes. Based upon Lee High’s data, Charlton Blackheath, the owner, dictated a management decision that sales could not be less than a $7.00 per unit order. The case then introduces a series of sales possibilities that are accepted or declined based essentially on these decision rules. However, a young file clerk decided to take an under-bid proposal at $5.50 for an order of 100 units of Great Heath based upon her own assumption that such a volume order would be profitable. A subsequent sales-cost report was developed by Lee High showing cost per unit based upon his predetermined analysis of costs and including profit per......

Words: 2103 - Pages: 9

Premium Essay

Milton Manufacturing Company

...“Milton Manufacturing Company” QUESTION 1: What state of Kohlberg’s Moral Development does Sammie Markowicz’ decision represent? The Sammie Markowicz’ decision places him in the Stage 3: "Fairness to Others" in the Kohlberg’s Moral Development. He is not only motivated by the company’s policy but seeks to do what is in the perceived best interests of the company, actually he was proud that he had “saved” the company $1.5 million, and he did the necessary to ensure the continued operation of his plant. I think the Markowicz’ main motivation was the loyalty and not the egoism. QUESTION 2: What alternative action could have Sammie Markowic taken? He must talk again with him supervisor to implement your proposal and, if got another negative answer, could have requested an audience with another top level. He should not break a rule that he did not understand the reasons that led the company to establish it. QUESTION 3: How should management deal with the situation once all the facts are known? They must correct the financial information with the appropriate disclosure. Also they should reinforce the internal control and establish institutional values that enable the employees take better decisions. QUESTION 4: What do you think is the single most important issue for the company arising out of this case? I think the most important issue in this case is the lack of institutional values to guide the behavior of employees and managers. An adequate framework of......

Words: 268 - Pages: 2

Premium Essay

Superior Manufacturing Company

...cost associated with product 103 is fixed cost and Super Manufacturing Company will have to bear this fixed cost regardless of its decision to produce product 103 or not. Currently, product 103 incurs net loss of $2.209 million, and if Super Manufacturing Company decides not to produce product 103, then it will incur additional loss of $2.671 million through net contribution lost by product 103. However, if product 103 is dropped then it will increase the net loss of Super Manufacturing Company to $3.359 million. Hence, Waters’ decision to keep the product 103 and use its contributions to cover the fixed cost is a good decision. Q2.)  Should Superior Manufacturing Company lower as of January 1, 2006 its price of product 101? What will be the new price of product 101? The fixed and variable cost structure of product 101 shows that 54% of its standard cost is fixed and 46% is variable. However, a decrease in product 101 sales units will result in lost contribution because the larger part of cost is fixed and Superior Manufacturing Company will have to bear the fixed cost regardless the number of units sold. Hence, lower the number of sales units, lesser will be the recovery of fixed cost, therefore, Superior Manufacturing Company is suggested to lower its price in order to increase number of sales units of product 101. Pricing Decision Based on alternate of sales price and quantity demand, Superior Manufacturing Company is suggested to a set the sales price at $20.50, by......

Words: 864 - Pages: 4

Premium Essay

Pinnacle Manufacturing Company

...Pinnacle Manufacturing Company Income Statement - Machine-Tech Division For the Year Ended December 31 2009 Dollar Value 5,670,915 9,518 1,824,751 3,836,646 94,153 13,008 32,315 22,732 3,851 818 6,708 1,958 1,490 34,296 247,813 11,074 470,216 204,801 506,186 1,146,126 193,851 28,458 143,924 28,949 1,823 14,837 4,846 596 9,689 3,348 11,658 15,036 5,072 6,554 6,188 8,386 2,340,328 2,810,544 1,026,102 2009 2008 Percent of Sales for Division Dollar Value 100.00% $ 5,790,017 0.17% 13,411 32.18% 1,993,730 67.65% 3,782,876 1.66% 0.23% 0.57% 0.40% 0.07% 0.01% 0.12% 0.03% 0.03% 0.60% 4.37% 0.20% 8.29% 3.61% 8.93% 20.21% 3.42% 0.50% 2.54% 0.51% 0.03% 0.26% 0.09% 0.01% 0.17% 0.06% 0.21% 0.27% 0.09% 0.12% 0.11% 0.15% 41.29% 49.58% 18.07% Sales $ Sales Returns and Allowances Cost of Sales* Gross Profit OPERATING EXPENSES-Allocated Salaries-Management Salaries-Office Licensing and certification fees Security Insurance Medical benefits Advertising Business publications Property taxes Bad debts Depreciation expense Accounting fees Total operating expenses-Allocated OPERATING EXPENSES-Direct Salaries-Sales Wages Rental Wages-Mechanics Wages-Warehouse Garbage collection Payroll benefits Rent- Warehouse Telephone Utilities Postage Linen service Repairs and maintenance Cleaning service Legal service Fuel Travel and entertainment Pension expense Office supplies Miscellaneous Total operating expenses-Direct Total operating expenses OPERATING INCOME $ 2008 Percent of Sales for Division......

Words: 625 - Pages: 3

Premium Essay

Shipper Manufacturing Company

...SHIPPER MANUFACTURING COMPANY Teaching Notes Synopsis and Purpose Shipper Manufacturing Company is a manufacturer of electrical products, laminated materials, and specialty products. The Advanced Products Division (APD), which manufactures the specialty products, has reformulated its corporate strategy. As a result, its manufacturing strategy should also be revised. In the past, APD has manufactured custom products in low volume for its customers. The division plans to gradually add higher volume products for multiple customers. As a result, changes will be needed in manufacturing to effectively compete in the new environment. The purpose of the case is to expose the students to the concept of a manufacturing strategy and the changes in manufacturing which are associated with a change in strategy. The case provides an effective vehicle for teaching this and also for the concept of integrating all aspects of operations. Discussion Questions 1. What objectives should be adopted in manufacturing with respect to cost, delivery, quality, and flexibility? 2. How should the objectives in manufacturing be achieved though process, organization, equipment, work force, capacity, scheduling, quality management and production and inventory control systems? Analysis The impending change in business strategy implies a change in manufactur¬ing toward higher volume and lower cost products. Presently the products are custom-designed and costs are passed...

Words: 1031 - Pages: 5

Premium Essay

Hanson Manufacturing Company

...Hanson Manufacturing Company In February 1993 Herbert Wessling was appointed general manager by Paul Hanson, president of Hanson Manufacturing Company. Wessling, age 56, had wide executive experience in manufacturing products similar to those of the Hanson Company. The appointment of Wessling results from management problems arising from the death of Richard Hanson, founder and, until his death in early 1992, president of the company. Paul Hanson had only four years’ experience with the company, and in early 1993 was 34 years old. His father had hoped to train Paul over a 10-year period, but the father’s untimely death had cut short this seasoning period. The younger Hanson became president after his father’s death, and had exercised full control until he hired Mr. Wessling. Paul Hanson knew that he had made several poor decisions during 1992 and that the morale of the organization had suffered, apparently through lack of confidence in him. When he received the 1992 income statement (Exhibit 1), the loss of almost $200,000 during a relatively good year for the industry convinced him that he needed help. He attracted Mr. Wessling from a competitor by offering a stock option incentive in addition to salary, knowing that Wessling wanted to acquire financial security for his retirement. The two men came to a clear understanding that Wessling, as general manager, had full authority to execute any changes he desired. In addition, Wessling would explain the reasons......

Words: 2119 - Pages: 9