Giberson’s Glass Studio

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Felicia Coates University of Virginia Darden Graduate Business School September 15, 2008 Edward Giberson Giberson’s Glass Studio Owner Dear Mr. Giberson: I appreciate an opportunity you provided for me to observe and analyze a production process at your studio. I would like to share with you my observations and recommendations. There are four products you produce at the studio: Patterned glasses, Paperweights, Wrapped tumblers and Vases. Based on amount of a batch mix and average number of units produced, I calculated Direct Materials per Unit as following: Item Direct Materials Cost per Unit, $ Patterned glasses 0.29 Paperweights 0.52 Wrapped tumblers 0.29 Vases 0.35 I also measured an amount of…show more content…
Then, you will have to organize you time better and rearrange the idle periods to locate additional 10.5 hour ((64 minus 43)x1/2 hour) per month for blowing and finishing additional Vases. Patterned glasses Paperweights Wrapped tumblers Vases Total per Bundle Expected Monthly Sales, Units 78 0 130 94 302 Selling Price $9.00 $15.00 $8.00 $25.00 Expected Monthly Revenues $702.00 $0.00 $1,040.00 $2,350.00 $4,092.00 Less Variable Costs Direct Labor 585.00 0.00 975.00 1175.00 2,735.00 Direct Materials 22.62 0.00 37.70 32.90 93.22 Contribution Margin $94.38 $0.00 $27.30 $1,142.10 $1,263.78 Total Monthly Fixed Costs 1,265.00 Breakeven Point in Bundles: 1.00 In this case, you will be able to cover all of your fixed costs only by changing of sales mix, without changing the prices. Please keep in mind that you have some more variable operating costs, not covered by this calculation (see Table on p. 2). They can amount to more than $1,000, if you add depreciation for equipment and truck. Book Value Life, years Monthly Depreciation Charge Furnace & Ovens $5,000.00 2 $208.33 Equipment & Gas Tanks $3,400.00 8 $35.42 Truck $8,500.00 5 $141.67 Total: $385.42 Add also another $38.33 per month as average monthly interest payment for your truck loan. So, I would plan for at least $2,500 for a Target

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