The most suitable costing method Yeltin should adopt is the practical capacity in order to remove the factor of uncertain budgeted sales figure. For this approach and the practical capacity of 65000-22000 units, then the revised overhead costs come out to be $30. With the inclusion of material and labor costs, the cost of the cartridge stand at $52 and the additional royalty expense of $10 raises the overall per unit cost to $62. The selling price of the cartridge is fixed at $150. With this selling price, the gross margin is equal to $88. The gross margin percentage is equal to 59%. In comparison to the budgeted volume, the gross margin has increased by 14%. See below
The valves that the company makes are produced using four different machine components and are produced and shipped in large lots. Scott feels as if the competitors are now able to match their quality but have yet to try and gain market share by cutting the prices of their valves. Additionally, the pumps are made using five components from machines and then assembled into the final product. These are then shipping to the industrial companies that have purchased these pumps. One issue is that competitors keep lowering their prices on their own pumps, so Wilkerson has to match these and lower their prices as well. This makes it hard for Wilkerson to keep their gross margin profits up since their prices continue to lower. Last, the flow controllers need more labor and machining components than either the pumps or the valves. Additionally, there are many other alternatives that are used in the industry so more product runs are needed for these versus the pumps or valves. Also, more shipments are needed for these since there are shipped to industrial companies. The flow controllers were doing better than the valves or the pumps since Wilkerson was able to raise their
Project 1 embedded risk can be assessed by evaluating the market risk, success/failure rate of the project.
The Orion Shield Project was analyzed, particularly in regard to the program manager, Gary Allison. Having never managed a program before, Gary was given an opportunity to do so on this valuable project. Several stakeholders came into play; some that helped contribute to Gary’s demise, and others who were often left to pick up the pieces where Gary may have failed. Ultimately, it was determined that in more than one way, Gary was not a successful program manager. Technical, ethical, legal, and contractual shortfalls were addressed to see where Gary and his team may have gone wrong.
A Cost-reimbursable contract would have been a better option for SEC. This contract would have required detailed budgets that indicate the intended use of the funds as this detail helps define appropriate and allowable expenditures. A Cost-reimbursable contract would have better motoring, accountability and incentive to meet deadlines.
Before performing the CVP analysis for the Hampshire manufacturing firm, we identify two basic cost classifications of interest comprising variable costs and fixed costs. As we analyze the case in study, we need to initially acknowledge that both variable costs per
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
This suggests that Wilkerson’s traditional cost structure is fairly accurate when applied to valves. The accuracy of this cost method for Wilkerson’s initial product likely explains its continued use when the company expanded to pumps and flow controllers. Another factor that may be positively contributing to valve sales is the customer loyalty Wilkerson established due to its high-quality products.
The cost to Swank Company of manufacturing 15,000 units of a particular part is $135,000, of which $60,000 is fixed and $75,000 is variable. The company can buy the part from an outside supplier for $6 per unit. Fixed costs will remain the same regardless of Swank’s decision. Should the company buy the part or continue to manufacture it? Prepare a comparative schedule in the format illustrated in Exhibit 21-6.
In this paper, The Orion Shield Project is critically analyzed to determine how effective the project manager, Mr. Gary Allison, is in operating as leader. Specifically, the paper focuses on what technical, ethical, legal, contractual, and other managerial issues plague the success of The Orion Shield Project. The paper attempts to analyze these issues by first introducing the reader to background about the project, and then moving into a deeper discussion of every one of the previously mentioned issues. Due to the individuals he works with and the differing situations he is placed, Mr. Allison must make difficult decisions at every corner. After
“Projects account for about one fourth of the U.S. and the world’s gross domestic product” (Schwalbe 2012). With that said, there are many challenges and issues that hinder the ultimate success or completion of a project. So is evident in the case of the Orion Shield Project, whose execution faced issues of technical, ethical, legal, contractual and interpersonal natures. Taking on a role that assumes responsibilities in stark contrast to newly appointed project manager Gary Allison’s professional background and experience doomed the project from the start. Not only did Gary not have the experience, he failed to research and prepare himself, prior to the project’s
* The Flow Controllers total product variable costs are $128,000, the Flow Controllers total fixed costs are
If Lars decides to invest around $6 million more in research and development, it is highly risky as the company’s survival depends largely on the success of the launch of Ray’s new product into the market.
Armstrong may be upset about Harrington because she estimated that there was only an 80 percent chance the improvements would be dramatic enough to warrant the full 100 percent price premium. Again, Orion is the leading designer and manufacturer of industrial valve systems. For such leading and innovative company, her assumption seems to be quite low. It is obvious that her low expectation for dramatic improvement doesn’t make significant difference in the EMVs. In other words, if she proactively dedicates her effort to redesigning and increases the possibility for dramatic improvement to 90%, the EMV will go up to $141,500 so that Armstrong can positively go ahead with the development efforts (see Figure 3).
If the company decided to sell the new product at price of D.Cr. 8.20, that means the full fixed expense of 1.20 is covered and the company will make high profit. However, the selling price of D.Cr. 8.20 is very high and under this price the company will sell the new product at a lower volume than what the company planned sale volume in the budget and that will affect the company in the market as a strong competitor in the food manufacturing. According to the case, the company sales volume drop to 30 tons when the product was sold at the price of D.Cr. 8.2. Thus, my recommendation are as follows: