Giberson Glass Studio

720 Words3 Pages
Giberson’s Glass Studio

Giberson is a skilled glassblower facing financial difficulties in his business. His resources are draining out quickly due to the following reasons –




Lack of proper bookkeeping following his divorce, since his wife used to take care of the activity
He has no knowledge which of his 4 items – glasses, paper weights, tumblers and vases – is profitable
He is in dire need of a better pricing strategy to maintain profits after accounting for costs and his wages

Looking at the available data, Giberson seems to be under-utilizing several of his resources, namely raw materials and time in addition to inefficiently pricing the products. Let us look at each of these factors separately.
 Raw Materials
Let us
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He could also use this time to expand his portfolio by taking new requests from his customers.
 Pricing o Current Profit
Let us calculate the current profit margin and then determine the profitability of the individual items.
First, let us determine the revenue generated from the 4 items
Item
Patterned glasses
Paperwights
Wrapped tumblers
Vases

Weekly
Production
19
10
32
8

Yearly
Production
760
400
1280
320
2760

Price/unit
($)
9
15
8
25

Revenue
($)
6840
6000
10240
8000
31080

Total number of products produced in a year = 2760
Total revenue generated = $31,080
Raw materials cost/year = $ $856.80 ~ $857
In order to calculate operating costs, we need to take into account the depreciation of the assets from the balance sheet. Depreciation cost (DC) = Amount/Life time of the item

Item
Office Supplies
Hand tools & supplies
Part time labor
Gas
Others
Salary
Truck
Insurance
Rent
DC - Furnace & Ovens
DC - Equipment
DC - Gas Tanks
DC - Trucks

Mothly Operating Cost
25
150
100
1000
640
2083.33
205
200
175
208.33
31.25
4.167
142.67

Months
10
10
10
10
12
12
12
12
12
12
12
12
12

Yearly Operating Cost
250
Variable
1500
Cost
1000
$12750
10000
7680
25000
2460
2400
Fixed
2100
Cost
2499.96
$44277
375
50.004
1712.04
57027

[NOTE: Not sure how to use liabilities from the balance sheet]
The items with a 12 month entries incur the cost irrespective of any production activities, while the items with 10 month entries depend on the weight of the items produced.
Total

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