profitability of Classic Pen company goes down despite of the introducing of its new two products, RED and PURPLE pens, which show more profitable than the traditional BLUE and BLACK product. These two new products are expected to be sold at premium selling prices about 3% and 10% respectively in the order and the new line, particularly PURPLE, in fact, showed much higher margin over the others. The problem was addressed is that the production technology required for the RED and the PURPLE pens demand specifications
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1. ABC revised product costs for 4 pens: Indirect labor (3 activities) ($20,000) a. .50 scheduling/ handling production runs= b. .40 physical changeover= c. .10 maintain records on 4 products Operate. Computer systems: ($10,000) a. .80 included in production run activity b. .20 keep records on 4 products Machines ($14000) a. Machine depreciation b. Machine maintenance c. Energy to operate machines Direct labor= 20,000+8000 (fringe benefits) = 28000 Indirect labor= 20,000+8000 (fringe)
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CLASSIC PEN COMPANY - DEVELOPING ABC MODEL Sourav Baliarsingh MIB -118083 ANALYSIS Classic Pen Company’s Return on Sales decreased significantly after it expanded its product line to include red and purple pens. Two alternatives exist: 1) Stop making red and purple pens 2) Increase the price of red and purple pens Prior to adding red and purple pens to its lineup, Classic Pen’s Return on Sales was approximately 22%. However, producing the new colors has caused many time consuming changeovers
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profitability of Classic Pen company goes down despite of the introducing of its new two products, RED and PURPLE pens, which show more profitable than the traditional BLUE and BLACK product. These two new products are expected to be sold at premium selling prices about 3% and 10% respectively in the order and the new line, particularly PURPLE, in fact, showed much higher margin over the others. The problem was addressed is that the production technology required for the RED and the PURPLE pens demand specifications
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CASE ANALYSIS: CLASSIC PEN COMPANY The Classic Pen Company, initially a low cost producer of blue and black ink pens, decided to expand its product line by introducing red and purple pens into the market. Utilizing the same machinery and technology, the company produced red pens at a three percent premium and purple pens at a ten percent premium. The transition to the increased production requirements have not been fluid and the profitability of the company is not at the level management previously
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CLASSIC PEN COMPANY: DEVELOPING AN ABC MODEL REVISED PRODUCT COSTS FOR THE FOUR PENS, BASED ON THE ACTIVITY INFORMATION COLLECTED BY DEMPSEY Cost centres under ABC Indirect labour=$ 20,000 40% *20,000=8,000 Total indirect labour=$ 28,000 Computer expenses=$ 10,000 Machine expenses= $ 8,000+ $ 4,000+ $ 2,000=$ 14,000 Cost estimates/allocation under ABC Activity | Indirect labour | Computer expenses | Machine expenses | Total | Activity rate | Handle production runs | 50% | 14,000
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THE TEACHING COMPANY ® Elizabeth Vandiver, Ph.D. Visiting Assistant Professor of Classics, University of Maryland Elizabeth Vandiver did her undergraduate work at Shimer College, Mt. Carroll, Illinois, where she matriculated in 1972 as a sixteen-year-old “early entrant.” After receiving her B.A. in 1975, she spent several years working as a librarian before deciding to pursue graduate work in Classics at the University of Texas at Austin. She received her M.A. in 1984 and her Ph.D. in 1990
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exclusive use at EDHEC - Business School, 2015 Harvard Business School 9-198-117 Rev. September 17, 1998 Classic Pen Company: Developing an ABC Model The Classic Pen Company Case Jane Dempsey, controller of the Classic Pen Company, was concerned about the recent financial trends in operating results. Classic Pen had been the low-cost producer of traditional BLUE pens and BLACK pens. Profit margins were over 20% of sales. Several years earlier Dennis Selmor, the sales manager, had seen opportunities
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CS113: Academic Strategies for the Business Professional Unit 6 Academic Writing Assignment Full Name: Heather Taylor Two-digit Section #: 06 Instructions: Download this document to your computer before filling it out. Save using “Save As” and add your name to the front removing the phrase “YourName” All of the gray boxes below should be appropriately filled in and the document saved again before submitting to the Unit 6 Dropbox. Paragraph Writing Paragraph
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some kind of career for himself as writer. This reminds of Haley Diaz, a young, but expressive author of her own works inside of a first grade classroom. She has the smarts, and the ability to reel you in with the words she applies with the use of pen and paper. Haley knows how to construct her papers from start to finish using conventions provided by her teacher. She connects you with imaginative thinking, real life events, and things she has seen. Her use of imagery, English-Language Arts conventions
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