In this case, you are provided information regarding selling prices and costs of several products offered by Mendel Paper Company. In addition, management has concerns about sales mix and rising costs. Address the questions (1-5) at the end of the case. Based on the case questions, you are required to provide a three to five double-spaced written report addressing management’s concerns. The written report should be properly formatted according to APA guidelines and demonstrate research and critical thinking skills. Conclusions and recommendations should be supported by at least 2 scholarly sources from the Ashford Library or other external sources, excluding the textbook.
For Questions 1 through 4, you will need to complete several calculations – be sure to label and clearly identify your work to demonstrate your understanding of the concept even if you arrive at the incorrect answer. The calculations should be included as part of your analysis and written report required for submission.
For Question 5, fully address management’s concerns as part of your written analysis using the new or the previous calculations to support your recommendation/explanation. As part of your written analysis, include how management might use these calculations to make decisions. The written analysis should be supported by at least 2 scholarly sources, excluding the textbook.
Week 1 Written Assignment should:
Demonstrate graduate level work including appropriate research and critical thinking skills. Be presented as a written analysis (not a question/answer format) Incorporate case questions into the overall analysis. Follow APA formatting guidelines including title page, reference page and in-text citations Consists of three to five double-spaced pages of content Provide at least 2 scholarly sources, excluding the textbook.
Mendel Paper Company
Intro
In the case of Mendel Paper Company which produces four basic paper products lines at one of its plants: computer paper, napkins, place mats, and poster board. Although the plant superintendent, Marlene Herbert is pleases with increased sales he is also concerned about the costs. The superintendent is concerned with the high fixed cost of production, the increases in fixed overhead and even variable overhead. He feels that the production of place mat should be discontinued. His reason for the discontinuation is that the special printing is driving up the variable overhead to the point where the company may not find it profitable to continue with the line. After reviewing the future predictions of the company I will answer the superintendent concerns by using both new and previous calculations to support my recommendation.
Question one
1. Original Computer paper Napkins Place mats Poster board Total
Volume 30,000 120,000 45,000 80,000 275000
Selling price $14.00 $7.00 $12.00 $8.50
Material Cost 6.00 4.50 3.60 2.50
Units per hr 6 10 5 4
Variable overheads $9.00 $6.00 $12.00 $8.00
Variable overhead per unit 9/6=1.5 6/10=.6 12/5=2.4 8/4=2
Total sales 30000*14=420000 120000*7=840000 45000*12=540000 80000*8.50=680000 420000+840000+540000+680000=2480000
Material cost 30000*6=180000 120000*4.50=540000 45000*3.60=162000 80000*2.50=200000
Variable overheads 30000*1.5=45000 120000*.6=72000 45000*2.4=108000 80000*2=160000
Contribution Margin 420000-180000-45000=195,000 840000-540000-72000=228000 540000-162000-108000=270000 680000-200000-160000=320000 195000+228000+270000+320000=1013000
CM per unit 195000/30000=6.50 228000/120000=1.90 270000/45000=6.00 320000/80000=4.00
In the table, contribution margin per unit was calculated by subtracting the total sales, material cost, and variable overhead. The contribution margin per unit was calculated by dividing the contribution margin by the total units predicted. If Marlene Herbert were to discontinue place mats, he would miss $270,000 that will go toward Mendel paper company fixed cost. The company currently has a plant overhead that is estimated at $420,000 for the quarter. In addition to the fixed plant overhead, the plant incurs fixed selling and administrative expenses per quarter of $118,000. This draws the company to a total fixed cost of $538,000. If Marlene Herbert were to discontinue the second highest contributor to the fixed cost, he would need to increase the volume of computer paper and lower material cost to help pull the contribution margin of the lowest product up to help support the lost of a ....
