Smurfit Paper Company Case Study

1521 WordsOct 8, 20127 Pages
Smurfit Paper Company case study Every business owner in the actual economy knows that cost management is a key factor in determining the successful continuation of the business, or its inevitable extinction. The paper industry is struggling to say the least according to an article in The Economist, with no new clients firms have adopted a strategy of merging with one another to attain a larger market share. With growing pressures from shareholders unsatisfied with low returns, it’s clear something has to change so when new potential business is available careful analysis of all relevant issues are paramount. In the case of Smurfit Paper Company there is no exception to the rule, as the sales manager is faced with the opportunity to…show more content…
So the marginal approach is the most appropriate and easiest calculation method. Another big problem is if the market were to set the price at € 200, what would be changed on costs and profit for the company? Based on Appendix A, we calculate the new costs and operating earnings as below(based on if we accept MFBC's purchase, on an output level of 7500 units) | Sales | € 1,500,000.00 | 100.00% | Variable costs | Distribution costs | € 93,750.00 | 6.25% | | Raw materials | € 600,000.00 | 40.00% | | Supplies,dies and pallets | € 37,500.00 | 2.50% | | | | | | Spread | € 768,750.00 | 51.25% | | | | | Production costs | Production wages | | | | fixed | € 30,000.00 | 2.00% | | variable | € 46,875.00 | 3.13% | | | | | | Maintenance, repairs and waste disposal | | | | fixed | € 67,500.00 | 4.50% | | variable | € 84,375.00 | 5.63% | | | | | | Energy and water | | | | fixed | € 75,000.00 | 5.00% | | variable | € 75,000.00 | 5.00% | | | | | | Total production costs | €

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