CASE APPLICHEM HBR

Along with the Benefit Measurement Method, Constrained optimization method can also be used which involves mathematical approach. Since this method involves the mathematical approach, several calculations are performed in order to take a decision to accept or reject the project. “Mathematical models, also known as Constrained Optimization Methods, are a category of project selection methods, which is a tool and technique of the Develop Project Charter process” (PMP, 2008). Cost-benefit analysis is one of the methods which fall into this category. All the positives and negatives of the project are taken into consideration and then the negatives are carefully excluded from the benefits. Different results are produced for the different projects. The most worthy and financially rewarding option are selected from these results. When employing this method, there are many things that are to be considered such as the impact of the decision on the development of the organization in the future, the length of time the equipment lasts and whether it is possible to do the cost control during the project.

Excel OM/QM Learning Curve tool was used to complete this analysis. This tool was selected because of the strategic importance of the learning curve. The learning curve is applied to aid in the formulation of strategic decisions about employment levels, capacity, costs, and pricing. This tool showed that with the learning curve applied how production hours would be affected if the batches increased. This allows the company to understand what their costs associated to labor is and also if they will be able to meet

There are many reasons that might cause this inefficiency coming from the production manager or the purchase manager, such as bad quality of the raw materials bought (which were cheaper after all), or waste of these during the production process.

In production costs variance chart above, Direct labor price variance(sum of direct labor variances of round, square and oval) valued at $14,913, and Oval production cost variance valued at $8,381.

Evergreen’s desired outcomes are to improve customer satisfaction by delivering its orders on time, reduce inventories, reduce employee overtime expense and determine if the shop floor manager should be replaced. The company needs to improve its demand planning responsiveness to better serve customer needs. By improving its process and capabilities as they relate to orders, the desired results will be realized.

Mueller-Lehmkuhl (ML) was a German producer of apparel fasteners. Apparel fasteners are used in the garment industry. ML had been producing apparel fasteners since the late 19th century. In recent years, they had achieved technological superiority which resulted in high margins for their products. ML valued reliability of their products and fast service to their customers. However, competition and domestic market saturation in the 1980s led ML to a crossroads in which they needed to decide how they would maintain domestic market leadership and while expanding to new markets.

• This cost method does not provide the best system for JDCW’s cost allocation. By using only three overhead rates the present system grossly undermines the true production costs since other activities of the production process are not acknowledged.

Andres was forced to import product from French division as he ran out of capacity several times due to new machines performing inadequately. This added an overhead expense of approximately 2147 (Additional maintenance costs + Transfer costs)

Develop and diagram an activity based cost model using the information in the case. Provide your best estimates about the cost and profitability of Wilkerson’s three product lines. What difference does your cost assignment have on reported product costs and profitability? What causes any shifts in cost and profitability?

H.E.B, the 11th largest grocery chain in United States, started 30 years ago. When the company was started, it was a predominantly private label company. Recognizing the customer drawing power of national brands, H.E.B took crucial steps to build a strong national brand presence. HEB was known for its superior quality products, its customer service and a broad assortment of merchandise. Additionally the company’s focus on delivering on its promise of everyday low prices, especially to the low income households that it catered to, was amongst its most critical success factors.

In addition, it wrongly allocated its indirect costs at volume bases. The use of process technology mentioned in the case led to an increase in factory overheads Since direct labor hours was not a cost driver of them, allocating its large proportion of fixed factory overheads and other indirect batch-level costs on the basis of DLHs in this cost system did not accurately measure how resources were being used. As a result, these inaccurate allocations would have significant costs to Elkay. Moreover, it disregarded its cost structure in which most costs were “fixed” that would not vary in the short run and should be allocated based on its practical capacity. By using the “actual sales volume” as the allocation base for allocating its large corporate overheads, this standard costing system in fact over-pricing its products for its actual productivity was lower than the practical capacity under the intense competition. As a consequence of all problem within the standard costing system, PPD urgently needed an accurate costing system.

Based on the real world functioning of businesses, every organization that deals with the process of manufacturing of certain products operates in accordance with the main principle of maximizing its profits. During the performance of daily activities, many business managers face a series of questions related to planning, control and decision making. In order to give answers to all these questions, an additional analysis needs to be considered. It is very important for managers to plan carefully how they are going to generate sufficient money to pay down costs and, in this way to result with a profit. As managers are interested in having the adequate information about the influence that certain actions might have on the profitability of the business, "Cost Volume and Profit" analysis plays a significant role by being a potential tool in facilitating the process of making the right decisions regarding planning and control in order to add value to the company. (Trifan and Anton, 2011). To further illustrate the essential impact that CVP analysis has on management authorities in making better decisions, I will refer to and analyze the case of the Hampshire Company which follows as below.

found out that despite this cost reduction in material cost, the costs of producing the low -end units for

When considering the preparation and development of a resource, cost is an important factor to consider. As well as monetary cost of the

Now let’s look at productivity for example. At Serenity Dental, the production goal is to produce $120,000 each month. Every month this year except for August, Serenity Dental was able to produce over $120,000. The production for August is lower because the problem could very well be