Essay on Case Brunswick Plastics

2974 Words May 14th, 2015 12 Pages
Brunswick Plastics
This case deals with cost analysis for pricing new business in a small injection moldingjob shop in "the Maritimes" in 1986, a good business year.

In Septe mber of 1986 Michael Smith, Division Manager of Brunswick Pla stics, faced an important pricing decision on a majo r new b id opportunity . Michael knew that pric ing too high m eant losing a bid that wo ul d em ploy currently unused capacity. On th e other hand, pricing too low meant l osses on the j ob. In the first two months after Michael arri ved in Novemb er of 1984, the presses were running only about 40% of available machine hours. The division had recently lost two large contracts and was struggling to find a solid market position. Michael had instituted a
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After the m olten plastic was inj ected, these molds were removed from the molding machine and placed into a vat of water for the curing cycle . At the completion of the curing cycle, the molds were opened manually and the product removed. For these products, the direct labor content could be significant since the operation was labor­ paced. The products also varied widely in terms of the assembly and testing time required. On the one hand, the company manufactured pediatric syringes used in the care of premature infants. These syringes required extensive attention to quality control and a considerable amount of manual assembly in a "clean room." On the other hand, the company also manufactured wheel chocks that required only a cursory inspection and no assembly . The other products produced by BP varied between these two extremes.
In additi on to the product costing complications caused by the wide mix of manufacturing , assembly, and testing re quirements , there were difficulties caused by the machines. Typical of the industry, the machines used at BP differed widely in terms of their reliability and their performance when producing different products. A machine problem meant that the machine would have to be stopped and reset. Because the machine stoppages were highly unpredictable, incorporating a normal or average machine failure cost into the product cost was difficult.
On the other hand, the materials, assembly, and testing costs of
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