Case Analysis Pepe Jeans

Thus my recommendation would be for him would involve the utilization of Activity Based Costing to allocate all indirect costs, direct costs, and overall manufacturing time into each and every product he is currently selling. His current method of splitting overhead between each line is inefficient and an incorrect picture of where all his resources are going. Going back to the Wrapped Tumblers example, Giberson would need to allocate more costs towards this product as its high levels of demand are utilizing more resources than he currently realizes. Realizing the true costing amounts of each product in this fashion will allow him to either drop inefficient products or increase/decrease the current prices of his products to match what he is truly spending on them. Given that his business is currently under distress, he also needs to focus on the effects of him completing his custom “made-to-order” products as they will bring in further revenue since manufacturing capacity is not at

The budget analysis shows that the labor hours of the firm are higher than the budgeted amount. As such, the firm needs to evaluate the cost benefit analysis of making or buying their products. To make this decision, various factors need to be considered. Before making the decision, Peyton needs to evaluate the marginal costs and revenue of making versus buying the products. The firm should take the option which provides the highest marginal profit which is the

a) In the first set of calculations, the staff used a discount rate of 20%, a five-year time horizon, and ignored taxes and terminal value. What is the relative attractiveness of these three alternatives?

Johnson and Johnson, commonly called J&J for short, is one of the world's well known, largest, most decentralized and most diversified health care companies. Since 1887, Johnson and Johnson has been producing, manufacturing and selling products related to human health and well-being. Today J&J has over 200 autonomous operating companies and do business globally specializing in consumer products, medical devices and diagnostics, and pharmaceuticals. Consumer products are the company's most recognizable segment, including popular brands like Tylenol, Johnson and Johnson Baby Shampoo and Band-Aid. The medical devices and diagnostics segment manufactures products including surgical equipment

In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.

Improve inventory days. This is part of Horniman’s business; it is unclear whether the inventory can be improved, particularly if they are moving to more-mature plants. The analysis to make this trade-off is similar to that of the payables policy. One would divide the expected margin gain by the increase in inventory levels to compute a marginal return on capital. One additional level of concern is the substantial additional risk associated with increasing inventory when facing uncertainty with respect to the effects of interest rates and adverse weather.

Webmasters.com has developed a powerful new server that would be used for corporations’ Internet activities. It would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 10% of the year's projected sales; for example, NWC0 = 10%(Sales1). The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 3%. The company’s

If Jones-Blair cut prices by 20%, they would need to maintain the profit of $1.14M to keep the status quo. The contribution margin right now is 35%, if the prices were cut by 20%, the contribution margin decreases to 15%. 35% is converted into .35 and 20% is converted into .20. The required sales in order to maintain the status quo if prices were reduced by 20% is 28M. This is found by finding the gross margin which is current sales multiplied by the contribution margin, 12M * .35 = 4.2M. We would then need to maintain the same gross margin to find out the required sales, (12M + x) * .15 = 4.2M. Computation equates x to be $16M. The $16M that is required to maintain the same gross margin, added to the $12M of the current sales equals $28M. In order to maintain the current profit, Jones-Blair would have to increase sales by $16M, more than double the current amount. If chosen, this alternative would be a very poor choice.

Considering these above mentioned features, to take over the company, it is essential for Joe Jr. to take due attention to a proper approach for inventory management, calculate an appropriate inventory level for each product, making it in line with the company’s business strategy, the market demand in the upcoming period:

In this case study, production and operations management (POM) issues of a mid-size company, named as Scientific Glass Inc., in a highly growing market are studied. Using the background information on past actions of the company to correct inventory management and their results, and considering the market leadership opportunity, how inventory management approach can be made better is explained by evaluating different alternatives from different aspects. In the first part, critical POM issues are mentioned, following that these problems are analyzed. In the third part, alternative options are listed and then they are evaluated. Finally, considering

Linda should follow the fourth alternative where the total cost involved is the most appealing factor economically to the organization. Even though there is a huge amount held in inventory holding costs, this will definitely help later when there is a sudden change in the forecasted demand

Lately, Mr. Milligan has become concerned with his inventory management methods. he now wants to better manage his inventory. As a starting point, he wants to examine his costs, sales, markup percentages, gross profits, and inventory levels. He asks you to review his inventory and make suggestions for improvement. He provides you with the data and asks you to prepare an Inventory Analysis worksheet.

Tasks:  What should Alison do? o Develop plans to improve the inventory management o Develop time-based supply strategies to bring competitive advantages to the organization  Identify the functions and forms of inventory  What are alternatives for inventory management? o ABC classification o Supplier-managed inventories (SMI) o Just-on-time or Just-in-time (JIT) o Enhance the forecasting system (factor correlated with inventory variation)  Provide training programs for current and new hiring employees 1

Peter Nicholson wishes to convert the factory in the north east to production of the electric taxi. Using data in Appendix C, Table 1, calculate payback period and the average rate of return.

1. Acting as an outside consultant, what would you recommend that Pepe do? Given the data in the case. Perform a financial analysis to evaluate the alternatives that you have identified. (Assume that the new inventory could be value at six weeks worth of the yearly cost of sales. Use 30 percent inventory carrying cost rate). Calculate a payback period for each alternative.