Superior Manufacturing Company
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?
Table 1: Product 103 Costs
|Product 103 Costs |
| |direct |indirect |
|Fixed | |16,039 |
|Variable |5,763 |7,181 |
If product 103 is terminated, there will be a greater loss since Superior has to continue to pay fixed costs. Fixed costs include Rent, Property Tax, Property Insurance, Indirect Labor, Light & Heat, Building Service, Selling Expense, SGA, Depreciation, Interest and Other Income. Loss of
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(Note – It is assumed that the price elasticity of demand is constant over the period of time.)
A result on the next page shows that at sales price of $21.50, the sales quantity rises to 1,140,085 units and net profit turns to positive for the first time. Besides, if a company continues to reduce the price further, at the point of $15.50, it is where the company’s profit on product 101 is in the highest position as it gives the net profit of $3,901,908.
However, there are several factors for the company to choose its pricing strategy. In this case, it may be better if the company choose to sell its product at $21.50 instead of $15.50. This is due to the fact that price-cutting appears to be not a good strategy in this industry. If every player in the same industry starts to lower the price of their products, every company will end up having the low price, which in turns lead to a low profit margin. Moreover, referring to the calculation in a below table, it also implies that if the price is lower than $12, sales will not be able to cover the variable cost incurred, thus it will bring about a loss in net profit.
|Sale price |Unit sold |% Cash |Actual |
| | |Discount |Sale Price |
National Fabricators Inc. is a company that specializes in the manufacturing of lockers, school furniture, toilet partitions, steel shelving, and is now currently owned by Tom Kruger after buying out $75,000 of shares from shareholders in 1992. The industry is very competitive as costs are rising and prices being cut while the economy declines at the same time. As the president of National Fabricators, Tom Kruger needs to bring the company back on its feet in order to generate profits and reduce its losses of $480,315 and outstanding bank loans of $784,000. Tom Kruger also predicts that sales would fall as much as 10% during the 1994 fiscal year due to government cutbacks on medical and educational spending as
3- As we can see the company would loss 0.52 cent per 1 kg if it decides to sell at 6.85 price and allocates the fixed expenses at 1.20 per 1 kg.
One can calculate the change in sales volume necessary for the price change to be profitable by using the following Basic Breakeven
When it comes to pricing we always strived to provide one of the lowest prices in the market. We decreased product prices by $0.50 on each product each year to appeal to consumers. Since providing a low cost product was one of our strategic goals we did not stray from decreasing prices. Looking back, perhaps we shouldn’t have been so loyal to our strategy when we were unable to turn a profit. While a strategy is important to stick to, being a profitable company is the ultimate goal.
Although the company did show an increased gross profit of $8,255,000 with $6,358,000 less Net Sales in 2013 versus 2012, that increase is due to the reduction in product Cost of Goods Sold by $14,613,000. Since increases in product price will negatively affect sales, one of management’s primary goals is to keep prices stable. This objective is achieved through implementation of cost cutting programs, investing in more efficient equipment, and automation of more steps in the production process.
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Imposition of the price ceiling of $0.50 will lead to a quantity demanded of 8,000. The company will be at its break even since it will make zero profit. The price is equivalent to the average total cost (Lehdonvirta, & Castronova,
M&L Manufacturing makes various components for printers and copiers. The company supplies these items to a major manufacturer. The company also distributes these and similar items to office supply stores and computer stores as replacement parts for printers and desktop copiers. In all, the company manufactures about 20 different items to distribute. The two markets (the major manufacturer and the replacement market) require somewhat different handling. Product for the major manufacturer can be shipped in bulk. However, the products for the retail segment must be packaged individually which requires additional handling and expense. Instead of using forecasting for production planning the operations manager decides which
Industrial psychology is concerned with people at work. It is also called personnel psychology. A closely related field is known as organizational psychology. Traditionally, industrial psychologists have assessed differences among individual workers and have evaluated individual jobs. Organizational psychologists generally seek to understand how workers function in an organization, and how the organization functions in society.
When price is $20.6, the quantity is 1,242,425 and profit is $101, we come near to break even point.
The ability to adapt as a manager is crucial, as 21st century leaders are currently working in a complex environment of constant change (Tamkin, 2016). Global production is always being innovated and developed to make it more efficient and to cut costs, therefore leaders of companies must always be up to date with current affairs. At the moment, China is the world’s leader of manufacturing, with over 38.1% of global manufacturing occurring there in 2013 (Hodgson, 2014). This is mostly due to the large workforce it can supply and the low minimum wage. However, large companies are starting to leave China and move to other countries for their manufacturing (Rapoza, 2012) as a result of their steadily rising minimum wage, poorly controlled regulations and a rapidly aging workforce due to their recently abolished one child policy. With China declining in popularity with firms to manufacture in, it is likely over the next 4 years it will become increasingly less popular. This will give way to the rise in popularity of other emerging markets such as India who are acquiring stronger representation in global production chains (Tamkin, 2016). The second biggest manufacturer in the world is America, which is expected to overtake China as the world’s leader of manufacturing by 2020. The main factor that contributes towards this change is recent developments in technology. As Tamkin stated in 2016 “Technological developments are slowly dissolving the boundaries between sectors and are
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Fabricant Manufacturing Corporation constructs and distributes highly specialized metal parts to over 1,000 clients across the Northeast. They are one of the leading facilities, designing, prototyping, and manufacturing engineering flexible materials for solar power, medical, aerospace, and electric power applications. The company’s chief executive officer is looking for ways to continue to meet its demand while providing quality products at a competitive price. The task at hand was to find projects that align with company goals: reduce energy consumption by a minimum of 20 percent, raise community consciousness of environmental issues and concerns, and generate a return on investment of at least 15 percent.
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