Group7: Management A/C assignment

[Gurpreet Singh]

Folks

Hope everyone received our next assignment to be presented on 12th April. Time is less, so lets carve out 1 hr tomorrow after the classes to discuss the case, who's going to do what and what our ppt will contain).

Our case is Classic Pen company.

On the first view of the case, looks like every one need to do some A/C with data from case, bring in numbers, and then go on for discussion, in case numbers vary, and conclude, whether current diversification is good, stopping red and purple color pens makes sense, or introducing new colors is better for the company.

Again the out put would be xls and a ppt.

[Typical case, where you get profitability wrong for a premium product due to ineffective costing. Should be simple.]

Good luk!!!

Regards

Gurpreet

[Gurpreet Singh]

FYI

As discussed over the lunch, we are all meeting tomorrow at IIMB premises from 2 PM to 4 PM to complete the assignment.

Pls read the case, and calculate the costings, and come up with case individually. We will discuss, merge learning, and move towards the ppt. I guess we may have to read the book till chapter 4 or 5, and then 7. Not sure though.

Still not got the actual question from ma'am, but gist of the question is clear.

I assume every one's having a copy of the case.

Regards

Gurpreet

[Gurpreet Singh]

FYI --- On Sat, 6/4/13, hema krishnamurthy <murth...@yahoo.com> wrote: From: hema krishnamurthy <murth...@yahoo.com> Subject: Re: Assignment for classic pen company To: "Ashwinee Kumar" <ashw...@gmail.com> Date: Saturday, 6 April, 2013, 8:02 The Questions are as follows:   1. Calculate the revised product costs for the four pens based on activity information collected.   2. What actions are stimulated by the ABC product costs   Regards Hema

[manohar rao]

Attaching mine too ......
 

---

Date: Sun, 7 Apr 2013 11:42:51 +0530
Subject: Re: Group7: Management A/C assignment
From: rahul.r...@gmail.com
To: sing...@gmail.com
CC: deepak.sh...@gmail.com; sahu_...@yahoo.com; robin....@capgemini.com; padmesh....@intel.com; sagi...@yahoo.com; krishnamma...@wipro.com; manu...@hotmail.com; am3...@gmail.com; gmite7...@googlegroups.com

I've done my number crunching, attached the costing sheet.

Lets analyse at 2pm ....

[Gurpreet Singh]

Cool guys. I got busy in other stuff. Didnt get chance. Will learn frm u guys :)

--
You received this message because you are subscribed to the Google Groups "GMITE7-Group7" group.
To unsubscribe from this group and stop receiving emails from it, send an email to gmite7-group...@googlegroups.com.
For more options, visit https://groups.google.com/groups/opt_out.
 
 

[Deepak Shivamurthy]

Here is the latest calculations from today's discussion at MDC.

Next steps:

- Based on the attachment, please come up with your options on how profitability could be increased - overall as well as per line

 - Product decisions(if any product needs wrapped up)

 - how variable costs be optimized.

We are meeting on skype on Tuesday, 9:30PM to discuss the options that team comes up with.

Regards,

Deepak

[manohar rao]

Updating the sheet with the below changes to get the final Contribution Margin based on
 
Calculating the Production Runs based on Prod Unit / Run
Set up Time Hours based on the Production Run calculated above and Setup Time / Run. Values are highlighted in yellow.
 
Finding is that increasing volume of Purple and Red pens would not help :-(
 

---

Date: Sun, 7 Apr 2013 16:04:09 +0530
Subject: Re: [gmite7-group7] RE: Group7: Management A/C assignment
From: deepak.sh...@gmail.com
To: sing...@gmail.com
CC: manu...@hotmail.com; sahu_...@yahoo.com; robin....@capgemini.com; rahul.r...@gmail.com; krishnamma...@wipro.com; padmesh....@intel.com; sagi...@yahoo.com; gmite7...@googlegroups.com; am3...@gmail.com

[Gurpreet Singh]

Guys

I did my cost analysis and everything's matching....

Now, If I need to play with volumes, I assume, I need to get per unit cost for every cost (direct and indirect), and then change formulas to calculate based on numbers * per unit cost, and then change volumes to see effect. Right?

Regards

Gurpreet

[Gurpreet Singh]

Folks

Attached my sheet, which is almost same as the one we did on Sunday, but with some minor changes, to ease some of the calculations.

Now with change at some numbers, rest is all calculated automatically. Can some one review the formulas?

Observations:

1. Contribution margin of purple is too much negative, -3.30. So this has to go, as we can't increase price by that much.

2. Contribution margin of Red is lil negative, -0.68, so we can play with price, but still can't play with volume, as margin will remain lesser than black and blue in any case. So I have no incentive to produce these more.

3. Contribution margin of Blue and Black is good, around 0.33, so increase in volume or price will help here.

Over all contribution margin of current setup is 13.53%

I have calculated for 4 cases:

1. Remove purple, and add those 100 machine hours to Black(most lucrative) , I see contri margin increase to 16.98%

2. Remove purple and Red, and add 1000 machine hours to Black(most lucrative),I see contri margin increase to 22.34%

3. Remove purple Red and blue, and only produce black, I see contri margin increase to 23.87%

4. Remove purple, and add those 100 machine hours to Black(most lucrative) , Also, increase price of Red to $2.50, I see contri margin increase to 20.50%

My suggestion to the company:

Assumption: Price of Black and Blue pens is already competitive, so I can't touch that.

Choose between option 2 or 4 from above.

If price of Red is already competitive, and can't be increased, choose 2.

If price of Red can be played with, choose 4, as returns are comparable, + we have a diversified product(3 colors)

Option 1 doesn't give me much to cheer about.

Option 3 looks good from A/C point of view, but I'm loosing all diversification , and also producing double the black pens, which may be detrimental in a long run, if demand decreases, as well as price.

Thoughts?

Regards

Gurpreet

[Gurpreet Singh]

Thanks Padmesh...

Comments inline...

On Tue, Apr 9, 2013 at 12:02 AM, Mishra, Padmesh K <padmesh....@intel.com> wrote:

2 Cents :

 

-          ABC helped us determine right prices for the pen (Traditional way of computation has resulted in wrong product pricing )

o   Classic pen company should have minimum unit Price of  Blue,balck, Red and Purple pen as 1.18,1.16, 2.23 and 4.95 respectively (Row#38) to recover manufacturing expenses incurred.

o   Classing pen company needs a revised price strategy ,keeping in mind above mention minimum unit price of pen.

-          To return to profitability :

o   Purple and Red are reducing the profit margin of the company .

o   Classic pen company should charge premium on Purple and Red to recover manufacturing cost (If the company decides to go with these 2 products)

I don't fully agree with this. Premium on purple is too high. The new price will be almost 3 to 4 times. So this option may not work, as this may not justify a too high price just for change of color.

o   Classic pen can introduce Bundle offer to boost sales  (Assuming there is a market)

§  Black (1.16) & Purple(4.95) – Bundle offer  :Minimum offer price 6.11

§  Blue(1.18)  & Red (2.23) – Bundle offer – Min Offer Price – 3.41

§  ….. can try other combination as well.

 Same as above. Purple contri margin is too negative. Company should get rid of purple for sure. These combos can be tried with Red though.

o   Segregate production of Red and Purple  with Improved technology to reduce setup time and improved qty/run .

Yes, this is good, if company wants to invest more to keep diversification of product intact. I guess, we can do some calculation, if company just produces red or purple, and then what's the overhead and unit price. If it comes very near to black and blue, we justify segregating production. 

o   Shutdown Red and Purple product Line

 

-Padmesh

 

 

From: Rahul Ravikanth [mailto:rahul.r...@gmail.com]
Sent: Monday, April 08, 2013 7:18 PM
To: Gurpreet Singh
Cc: manohar rao; Deepak Shivamurthy; Subrat Sahu; Scaria, Robin; krishnamma...@wipro.com; Mishra, Padmesh K; sagi...@yahoo.com; Gmite-7 Project Group; Archana Mohan

Subject: Re: [gmite7-group7] RE: Group7: Management A/C assignment

 

My observations:

 

1. Retain Black and Blue, their contribution margin is healthy, always demand for black and blue, they are bread winners for the company, contribution margin and profit/unit is healthy.

2. Retain Red, only if we increase the price and volume of red as it's contribution margin and profit/unit becomes positive.

3. Discard purple from production.

 

Attached my sheet.

 

[Gurpreet Singh]

All

I had some spare time today, so prepared first version of the ppt. I guess, we are past the analysis state, and only thing to discuss is recommendations to put in. 

Have a look and we can discuss more tonight @ 9:30 PM over skype. 

Regards

Gurpreet

[manohar rao]

Hi All,
 

Observations:

1. The pricing of the pens for the color Red and Purple is not correct. This is mainly due to the Production Run factor which is increasing the overall cost.

2. Black pen has high profit

3. Setup time for Blue and Purple is same. But the Production run quantity makes a lot of difference

4. Increasing the volume for Red and Purple would hit the profit to a larger extent.

5. Also see that if we don’t produce the Red and Purple color pen still the profit is at 18.67%. (In the cost sheet, set the value for Production units for Red and Purple to Zero)

 

Below are the proposals:

1. Profitability exist more from Black pen than blue pen hence we can increase the production of Black if demand exist

2. We could increase the price of the Red and Purple as we know the demand exist. But if there is a competition then may not be a good idea. We might have to definitely improve on the efficiency.

3. If the company is ready to setup another infrastructure for the colored pens then we could reduce the overhead cost to a large extent

4. Since we see that by not producing Red and Purple Pen the profit is at 18.67% which has gone up by 5.15%. So it’s fine to still keep the machine idle and not reach the 10,000 Machine Hour

 
Thanks and Regards,
Manohar.
 

---

From: sing...@gmail.com
Date: Tue, 9 Apr 2013 18:11:28 +0530

Subject: Re: [gmite7-group7] RE: Group7: Management A/C assignment

To: padmesh....@intel.com
CC: rahul.r...@gmail.com; manu...@hotmail.com; deepak.sh...@gmail.com; sahu_...@yahoo.com; robin....@capgemini.com; krishnamma...@wipro.com; sagi...@yahoo.com; gmite7...@googlegroups.com; am3...@gmail.com

[Gurpreet Singh]

one observation below...

On Tue, Apr 9, 2013 at 6:52 PM, manohar rao <manu...@hotmail.com> wrote:

Hi All,
 

Observations:

1. The pricing of the pens for the color Red and Purple is not correct. This is mainly due to the Production Run factor which is increasing the overall cost.

2. Black pen has high profit

3. Setup time for Blue and Purple is same. But the Production run quantity makes a lot of difference

4. Increasing the volume for Red and Purple would hit the profit to a larger extent.

5. Also see that if we don’t produce the Red and Purple color pen still the profit is at 18.67%. (In the cost sheet, set the value for Production units for Red and Purple to Zero)

 Hey, my figures are > 22%. Check out my sheet(remove purple and red tab) . How come its coming 18.67. We need to reduce parts administration also, if red and purple don't exist.

[Subrat Sahu]

Hello Folks,

 

Please find attached, the worksheet and analysis herewith. I have also attached a chart, which lists about 12 'What-If Scenarios' in addition to the original costing details. Please refer to the attached diagram for a summary (this is there in the excel sheet as well).

 

Few Observations:

1. Considering the constraint of 10,000 hours of machine hours, I came up with about 12 what-if scenarios, which kind of represent most of the unique combinations of the production quanties. Surprisingly, the combination which has yielded maximum profit margin%, is the 'All Purple' option. This is mainly due to the higher sale-price of the purple pen, which is offsetting the marginal higher cost of production (cost of production  for PURPLE is on the higher side, due to the higher material cost!).

2. The next best option that resulted in higher profit was a mix of blue and purple, with a higher %purple in the mix. 

3. Keeping the red and purple to zero, and further altering the black and blue, are resulting in almost the same overall profit margin (13.33%).

 

Appreciate any feedback/comments!

 

Cheers,

Subrat

98864-82604

From: Gurpreet Singh <sing...@gmail.com>
To: manohar rao <manu...@hotmail.com>
Cc: "Mishra, Padmesh K" <padmesh....@intel.com>; Rahul Ravikanth <rahul.r...@gmail.com>; Deepak Shivamurthy <deepak.sh...@gmail.com>; Subrat Sahu <sahu_...@yahoo.com>; "Scaria, Robin" <robin....@capgemini.com>; "krishnamma...@wipro.com" <krishnamma...@wipro.com>; "sagi...@yahoo.com" <sagi...@yahoo.com>; Gmite-7 Project Group <gmite7...@googlegroups.com>; Archana Mohan <am3...@gmail.com>
Sent: Tuesday, April 9, 2013 7:34 PM
Subject: Re: [gmite7-group7] RE: Group7: Management A/C assignment

one observation below...

On Tue, Apr 9, 2013 at 6:52 PM, manohar rao <manu...@hotmail.com> wrote:

Hi All,  

Observations:

1. The pricing of the pens for the color Red and Purple is not correct. This is mainly due to the Production Run factor which is increasing the overall cost.

2. Black pen has high profit

3. Setup time for Blue and Purple is same. But the Production run quantity makes a lot of difference

4. Increasing the volume for Red and Purple would hit the profit to a larger extent.

5. Also see that if we don’t produce the Red and Purple color pen still the profit is at 18.67%. (In the cost sheet, set the value for Production units for Red and Purple to Zero)

 Hey, my figures are > 22%. Check out my sheet(remove purple and red tab) . How come its coming 18.67. We need to reduce parts administration also, if red and purple don't exist.

Below are the proposals:

1. Profitability exist more from Black pen than blue pen hence we can increase the production of Black if demand exist

2. We could increase the price of the Red and Purple as we know the demand exist. But if there is a competition then may not be a good idea. We might have to definitely improve on the efficiency.

3. If the company is ready to setup another infrastructure for the colored pens then we could reduce the overhead cost to a large extent

4. Since we see that by not producing Red and Purple Pen the profit is at 18.67% which has gone up by 5.15%. So it’s fine to still keep the machine idle and not reach the 10,000 Machine Hour

  Thanks and Regards, Manohar. 

From: sing...@gmail.comDate: Tue, 9 Apr 2013 18:11:28 +0530

Gurpreet

Thanks Padmesh...

Comments inline...

Gurpreet

 

Gurpreet

 

Date: Sun, 7 Apr 2013 16:04:09 +0530
Subject: Re: [gmite7-group7] RE: Group7: Management A/C assignment
From: deepak.sh...@gmail.com
To: sing...@gmail.com
CC: manu...@hotmail.com; sahu_...@yahoo.com; robin....@capgemini.com; rahul.r...@gmail.com; krishnamma...@wipro.com; padmesh....@intel.com; sagi...@yahoo.com; gmite7...@googlegroups.com; am3...@gmail.com

 

Here is the latest calculations from today's discussion at MDC.

 

Next steps:

- Based on the attachment, please come up with your options on how profitability could be increased - overall as well as per line

 - Product decisions(if any product needs wrapped up)

 - how variable costs be optimized.

 

We are meeting on skype on Tuesday, 9:30PM to discuss the options that team comes up with.

 

Regards,

Deepak

On Sun, Apr 7, 2013 at 12:30 PM, Gurpreet Singh <sing...@gmail.com> wrote:

Cool guys. I got busy in other stuff. Didnt get chance. Will learn frm u guys :)

On Apr 7, 2013 12:16 PM, "manohar rao" <manu...@hotmail.com> wrote:

Attaching mine too ......
 

To unsubscribe from this group and stop receiving emails from it, send an email to mailto:gmite7-group7%2Bunsu...@googlegroups.com.

For more options, visit https://groups.google.com/groups/opt_out.
 
 

--
You received this message because you are subscribed to the Google Groups "GMITE7-Group7" group.

To unsubscribe from this group and stop receiving emails from it, send an email to mailto:gmite7-group7%2Bunsu...@googlegroups.com.

For more options, visit https://groups.google.com/groups/opt_out.
 
 

--
You received this message because you are subscribed to the Google Groups "GMITE7-Group7" group.

To unsubscribe from this group and stop receiving emails from it, send an email to mailto:gmite7-group7%2Bunsu...@googlegroups.com.

For more options, visit https://groups.google.com/groups/opt_out.
 
 

 

 

 

-- You received this message because you are subscribed to the Google Groups "GMITE7-Group7" group.To unsubscribe from this group and stop receiving emails from it, send an email to mailto:gmite7-group7%2Bunsu...@googlegroups.com. For more options, visit https://groups.google.com/groups/opt_out.  

-- You received this message because you are subscribed to the Google Groups "GMITE7-Group7" group. To unsubscribe from this group and stop receiving emails from it, send an email to mailto:gmite7-group7%2Bunsu...@googlegroups.com. For more options, visit https://groups.google.com/groups/opt_out.    

[Gurpreet Singh]

This is cool....

Hey, you got some figures wrong.... 

we need to account for decrease in overhead if one color goes out of business.

I've fixed what if 3, and changes are marked in Green. You can see return of 22% now. Check the formulas I have put. 

Best case is, produce only black.

Second best is to produce black, and blue.

Third best is to produce black and blue, and red, but increase price of red to make contribution margin >0.

Call me if required.

Guys, presentation will be ready today.... Hope you checked the first version. Calling for presenters?

Regards

Gurpreet

[Gurpreet Singh]

Attached ver 0.2 of the ppt.

Almost final, till you guys suggest improvements.

Tried to capture all the points we had in emails in recommendations. Let me know, if I missed some point.

I guess we are done with this case.

Regards

Gurpreet

[Gurpreet Singh]

Thx guys....

Let me know if u need any improvements....

Also, if skype is happening, let us all know the time. I may not be available till 9 PM or so today.

Hope we get to present the case tomorrow, as we have got decent data.

Regards

Gurpreet

On Thu, Apr 11, 2013 at 12:14 AM, Mishra, Padmesh K <padmesh....@intel.com> wrote:

HI Folks ,

 

I missed Tuesdays Calls due to calendar conflict .I have gone through the slide Gurpreet has put in ..Thanks Gurpreet.

Let’s have a dry run tomorrow  if we agree to meet on skype (Time?)

 

 

Thanks,

Padmesh

 

From: Rahul Ravikanth [mailto:rahul.r...@gmail.com]
Sent: Wednesday, April 10, 2013 7:18 PM
To: Satya Peesapati
Cc: Gurpreet Singh; Subrat Sahu; manohar rao; Mishra, Padmesh K; Deepak Shivamurthy; Scaria, Robin; krishnamma...@wipro.com; Gmite-7 Project Group; Archana Mohan

Subject: Re: [gmite7-group7] RE: Group7: Management A/C assignment

 

hey satya,

 

last evening 3 of us (gurp, mano, I) skyped and pretty much finalized what needs to go in. go through the slides and check if you want to improve or add on to the observations. we have decided to do this over mails, so we can skip IIMB meet tomorrow.

 

gurpreet, thanks dude for compiling the data and putting them in the slides. I like slide 15, Oops!! :)

 

cheers,

rahul

 

On Wed, Apr 10, 2013 at 7:03 PM, Satya Peesapati <sagi...@yahoo.com> wrote:

Hi friends,

 

I could not get on the call last night. Are we meeting tomorrow at IIMB?

 

Regards,

Satya

 

Gurpreet

one observation below...

Gurpreet

Thanks Padmesh...

Comments inline...

Gurpreet

 

Gurpreet

 

Updating the sheet with the below changes to get the final Contribution Margin based on  Calculating the Production Runs based on Prod Unit / RunSet up Time Hours based on the Production Run calculated above and Setup Time / Run. Values are highlighted in yellow. Finding is that increasing volume of Purple and Red pens would not help :-(

 

Date: Sun, 7 Apr 2013 16:04:09 +0530Subject: Re: [gmite7-group7] RE: Group7: Management A/C assignmentFrom: deepak.sh...@gmail.comTo: sing...@gmail.comCC: manu...@hotmail.com; sahu_...@yahoo.com; robin....@capgemini.com; rahul.r...@gmail.com; krishnamma...@wipro.com; padmesh....@intel.com; sagi...@yahoo.com; gmite7...@googlegroups.com; am3...@gmail.com

 

Here is the latest calculations from today's discussion at MDC.

 

Next steps:

- Based on the attachment, please come up with your options on how profitability could be increased - overall as well as per line

 - Product decisions(if any product needs wrapped up)

 - how variable costs be optimized.

 

We are meeting on skype on Tuesday, 9:30PM to discuss the options that team comes up with.

 

Regards,

Deepak

On Sun, Apr 7, 2013 at 12:30 PM, Gurpreet Singh <sing...@gmail.com> wrote:

Cool guys. I got busy in other stuff. Didnt get chance. Will learn frm u guys :)

On Apr 7, 2013 12:16 PM, "manohar rao" <manu...@hotmail.com> wrote:

Attaching mine too ...... 

Date: Sun, 7 Apr 2013 11:42:51 +0530Subject: Re: Group7: Management A/C assignmentFrom: rahul.r...@gmail.comTo: sing...@gmail.comCC: deepak.sh...@gmail.com; sahu_...@yahoo.com; robin....@capgemini.com; padmesh....@intel.com; sagi...@yahoo.com; krishnamma...@wipro.com; manu...@hotmail.com; am3...@gmail.com; gmite7...@googlegroups.com

-- You received this message because you are subscribed to the Google Groups "GMITE7-Group7" group. To unsubscribe from this group and stop receiving emails from it, send an email to mailto:gmite7-group7%2Bunsu...@googlegroups.com. For more options, visit https://groups.google.com/groups/opt_out.    

 

[Subrat Sahu]

The deck looks really good and stroy-line has also comeup really well !!!

 

I still have a question on the first 2 sub-items (50% Scheduling-Handling-Prod-Runs & 40% Change-Over-Runs) on the indirect-labor cost calculations. These 2 indirect labor costs are directly related to the #Prod-runs and #Set-up-hours, respectively. Hence this indrect labor would be a variable cost, based on these two parameters.

 

Will clarify the above Q, prior to the start of the first session in the morning. I plan to reach there around 7:15am and will sync up on this.

 

Regards,

Subrat

9886482604

From: Gurpreet Singh <sing...@gmail.com>
To: Subrat Sahu <sahu_...@yahoo.com>
Cc: manohar rao <manu...@hotmail.com>; "Mishra, Padmesh K" <padmesh....@intel.com>; Rahul Ravikanth <rahul.r...@gmail.com>; Deepak Shivamurthy <deepak.sh...@gmail.com>; "Scaria, Robin" <robin....@capgemini.com>; "krishnamma...@wipro.com" <krishnamma...@wipro.com>; "sagi...@yahoo.com" <sagi...@yahoo.com>; Gmite-7 Project Group <gmite7...@googlegroups.com>; Archana Mohan <am3...@gmail.com>

Gurpreet

one observation below...

Gurpreet

Thanks Padmesh...

Comments inline...

Gurpreet

 

Gurpreet

 

Updating the sheet with the below changes to get the final Contribution Margin based on  Calculating the Production Runs based on Prod Unit / RunSet up Time Hours based on the Production Run calculated above and Setup Time / Run. Values are highlighted in yellow.  Finding is that increasing volume of Purple and Red pens would not help :-(

 

Date: Sun, 7 Apr 2013 16:04:09 +0530Subject: Re: [gmite7-group7] RE: Group7: Management A/C assignmentFrom: deepak.sh...@gmail.com To: sing...@gmail.com CC: manu...@hotmail.com; sahu_...@yahoo.com; robin....@capgemini.com; rahul.r...@gmail.com; krishnamma...@wipro.com; padmesh....@intel.com; sagi...@yahoo.com; gmite7...@googlegroups.com; am3...@gmail.com

 

Here is the latest calculations from today's discussion at MDC.

 

Next steps:

- Based on the attachment, please come up with your options on how profitability could be increased - overall as well as per line

 - Product decisions(if any product needs wrapped up)

 - how variable costs be optimized.

 

We are meeting on skype on Tuesday, 9:30PM to discuss the options that team comes up with.

 

Regards,

Deepak

On Sun, Apr 7, 2013 at 12:30 PM, Gurpreet Singh <sing...@gmail.com> wrote:

Cool guys. I got busy in other stuff. Didnt get chance. Will learn frm u guys :)

On Apr 7, 2013 12:16 PM, "manohar rao" <manu...@hotmail.com> wrote:

Attaching mine too ...... 

Date: Sun, 7 Apr 2013 11:42:51 +0530Subject: Re: Group7: Management A/C assignmentFrom: rahul.r...@gmail.comTo: sing...@gmail.com CC: deepak.sh...@gmail.com; sahu_...@yahoo.com; robin....@capgemini.com; padmesh....@intel.com; sagi...@yahoo.com; krishnamma...@wipro.com; manu...@hotmail.com; am3...@gmail.com; gmite7...@googlegroups.com