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Baldwin Bicycle Company (Baldwin) produces and distributes bicycles to independently owned toy stores and bicycle shops, from which it earns roughly $10 million in sales revenue annually. It offers a number of designs with 10 models suited for different users and its products are perceived as above average in quality and price but not "top of the line." Due to the poor economy, the bicycle industry plateaued and Baldwin’s sales continuously declined for the past two years. As a result, the company was only able to utilize its plant at 75% of one-shift capacity.
Hi-Valu Stores, Inc (Hi-Valu) operates a chain of discount department stores. Its sales volume has increased to the extent that they are now considering the addition of “house-brand” products
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These are differential costs. Since they have maintained the same designs for years, it is assumed that developing designs is not part of Baldwin’s ordinary course of business hence, accepting the proposal would require them to hire designers.
Holding Costs. The incremental holding cost of inventory includes costs that are directly attributable to the inventory from the Hi-Valu deal. Analysis on the applicability of holding costs in this inventory is divided into two:
Baldwin’s Warehouse: The inventory handling labor and equipment costs are not considered in the asset-related costs applicable to WIP since these are still being accounted for as direct labor.
Hi-Valu Warehouse: Meanwhile, in Hi-Valu, state property tax on inventory (SPTI) and inventory handling labor and equipment costs are excluded in the asset-related costs applicable to the total inventory. The rationale for the omission of SPTI is that US Taxation laws implement SPTI based on possession rather than ownership. The latter, on the other hand, is removed because the product is not within the possession of Baldwin thus, Hi-Valu will shoulder the maintenance, security, and other related costs of handling the
ARB43, Ch.4 Par.8 ?A departure from the cost basis of pricing the inventory is required when the utility of the goods is no longer as great as its cost.
If done right, I believe that all of the costs can be allocated to each of the three products through both direct and overhead costs. The only direct costs that are being included currently are labor and manufacturing costs. I broke up overhead into overhead based off direct labor and overhead based on units sold.
Marketing analysis: Hafren Baum retails luxury home furniture which makes the demand for it being cyclical. Over the last two years from 1994 to 1995 the net sales for Hafren Baum have fallen by 21.05% and 1.24% respectively. There are number of factors which have caused this change. According to German economic statistics, we can see that the economy slowed down which forced retailers to reduce their prices to keep the old demand. Despite the fact that Hafren Baum constructed 3 more outlets in the expectation of higher sales volume their sales went down by almost 18% which seems to be the result of boom turning to bust in 1993. Later in 1995, the economy started recovering, but the sales for small retailers like Hafren kept declining. The
The calculation of inventory expense on the operations statement and the posted balance on the statement of condition (balance sheet) may be approached in several different ways. List and discuss the various methods of inventory valuation that may be used. Indicate in your response why a certain method may be used in certain situations. What are predominant methods used in health care organizations (tax exempt or for profit)
...h the full expenses included. Challenge overseeing and incorporating over a huge supply change and developing patterns.
Based on future supplier contracts, shortening lead time for delivery of parts and materials establishing leaner processes, namely addressing wastes identified through implementing a Just-In-Time (JIT) system. A centralized wharehouse system, co-located near the manufacturing plant will reduce shipping and transportation costs or look for larger space with warehousing capacity. Savings, significant enough will be a factor if space with warehousing falls within the
There are three forms of inventory costing methods we tend to use LIFO, FIFO, and weighted average cost. “Average-cost method prices items in the inventory on the basis of the average cost of all similar goods available during the period” (Kiso, weygandt, Warfield 429). The two most common methods used that we are going to discuss are LIFO and FIFO. As the name implies, LIFO stands for last-in, first out, which implies that the last product that is placed on the market is the first one to be sold/ purchased. FIFO meaning first-in, first out is the opposite of LIFO, the first item placed is typically the first item to be sold. These two accounting methods tend to differ under GAAP, which is rule based and IFRS, which is considered to be principle based.
...n a mix of fixed and variable costs as well as other influences such as learning curves, the manufacturer will experience reduced incremental costs for each additional unit purchased above each tier’s minimum purchase quantity. The main goal of the below methodology is to capture the inefficiencies of minimum purchase quantities and purchase based on true costs.
After a 4 P analysis of the company one found that it found itself in a luxury market where product quality and constant innovation are key points for the success. That is why the production process and its design can take even months. Product line is extensive however it is only conformed of high priced products. Price in this case is a guarantee of the quality present in the product. Moreover, high pricing represent an element of differentiation that the customer appreciates. However this is not a setback, LVMH has managed to have world wide presence and success. To accomplish it its selective retailing division is of high importance. Nevertheless, promotion posses the major challenge since its through this that the image of the product its transmitted that is why the company poses a major part of its budget in this section. It is Important to note that the percentage allocated is higher than those of most competitors.
Tesla Motors Inc. is an American public company which is known worldwide because of its experience in designing, manufacturing and also the selling of electric cars and electric components for vehicles. The motor was started back in the year 2003 in San Carlos, California in the United States (Teslamotors.com, 2014). The company had its headquarters in Palo Alto and at the time of its inception, Elon Musk was its chief executive officer (CEO) (Hunger, 2010).
The just-in-time (JIT) inventory system was developed in Japan after World War II, in an effort to control costs during fiscally challenging economic times (Waguespack and Cantor, 1996). The challenge that faced many Japanese companies in the post-War era was to find a way to meet the needs of customers and businesses while utilizing as few resources and as little capital as possible. The Japanese developed these set of techniques in order to control production, limit unnecessary products and reinvest the valuable capital left from the savings back into the business structure (Waguespack and Cantor, 1996). Much of the success of many Japanese corporations over the past four or five decades has been was linked to the principles of JIT (Chhikara and Weiss, 1995).
Hennes & Mauritz (H&M) is a Swedish clothing retail company. The company was founded by Erling Pesson in 1947. The first H&M store was opened in Vaesteras, Sweden in 1947. The mission of H&M is to offer fashion and quality at the best price where “quality includes ensuring that products are manufactured in a way that is environmentally and socially sustainable” (H&M, vision & policy, n.d., para. 1). This essay is to highlight the current market analysis, pricing strategy, retail strategy, and competitive advantage analysis of the company.
Of greater importance, job-order costing system needs to accumulate three types of information which include direct materials, direct labor, and overhead. These factors are highly important essentially because of the significant variations in the products produced. Hence, each product or batch has a job identification number and costs are accumulated by a job number. All the more, job-order costing systems requires detailed accounting information and thus the total cost of all jobs is accumulated in one work-in process inventory control account; details of the cost materials, labor, and overhead for each job are kept in subsidiary records called job-order cost sheets (Edmonds, Tsay, & Olds,
In the context of working capital management, inventory management means the primarily decreasing size of inventory. Companies may have an ideal level of inventories. Big inventory decreases the risk of a stock-out but it desires more working capital. In managing accounts payable, postponing expenditures to suppliers can be used for a flexible and cheap source of financing an enterprise. But late expenditures can be also very costly if the company is offered a discount for early payment. (Deloof 2003)
Inventory can be explained as any assets that are held for future use or sale. Inventories are held for a variety of reasons, such as customer demand for end items, smoothing production, a hedge against stock outs and price increases, and economical purchasing. It is very costly and wasteful to keep large inventory on hand. The new technology and application quantitative tools and techniques for inventory management have permitted decrease in inventory. Top management needs to understand the role that inventories have on a company’s financial performance, operational efficiency, and customer satisfaction and strike the proper balance in meeting strategic objectives. They are responsible in keeping sufficient inventories to meet demand of the customers by sustaining the lower cost as possible. Inventories are required for a business to operate efficiently and effectively. Inventory management is a very significant part of basic operations activities. Most businesses and general organizations obtain most of their revenue through the sale of inventory.