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New York Fashion Company Case Study

In: Business and Management

Submitted By reecejo
Words 4455
Pages 18
Analysis Report

Case Study Number 1

The NY Fashion Company

Prepared for

Prepared by John

July 2006
Table of Contents

Summary of Case Study: 3
Item a: Maximize total contribution margins given the constraints 3
Item b: Sensitivity analysis of solution given 10,000 yards additional acetate. 6
Item c: Income statement 7
Item d: Unit profit using the volume-based costing method. 10
Item e: Unit profit using the activity based costing method. 11
Item f: Financial/economic explanation for the difference between the unit profits 14
Appendix – Case Study #1 A-1

Summary of Case Study:

This case study concerns determination of an optimum product mix solution given a number of resource, demand, and production constraints for a clothing manufacturer. Sensitivity to change in one of the resource constraints is examined. An income statement is developed based on the optimum solution determined. Finally, the unit profit is calculated using both traditional volume based costing and using activity based costing; included is a discussion of the financial and economic reasons for the difference between the two results.

The case study document is included as an appendix to this report.

Because of difficulties presenting the TORA output files in a readable state as integral parts of this document, those output files are both embedded in the document represented as icons and they will be submitted as four separate files along with this report. With this report file open on a computer equipped with Adobe Reader, the icons can be clicked to open the files for viewing.

Item a: Maximize total contribution margins given the constraints

for production, resource, and demand.

The first step was to calculate the unit contribution margin for each potential clothing item by subtracting the direct production costs from the pre-determined sales

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