Case 17.2 lipman bottle company

 

Please complete the following from the textbook:

  • Case 17.2 Lipman Bottle Company 
  • Review the attached “Cost Analysis Resource”.     
  • Refer to the HINTS and additional notes below.

Here are the questions you need to answer for this case: 

  • Calculate the variable costs per thousand bottles for one-separation rounds, two-separation rounds, and two-separation ovals, assuming that all ovals are printed on the machine with the automatic feature for ovals.
  • Do one set of calculations for the Albany area (scrap included) and another for New York–New Jersey (freight included, but not scrap).
  • Only do one bottle size (the smallest) and assume the average order size is 10,000 bottles.
  • Prepare a suggested price list for the Albany area. Consider only one-separation rounds and two-separation rounds or ovals, for only the smallest size bottle

As a guide to completing this case you should consider the following questions:

  • How did Mr. Lipman’s goal of a 30 percent margin (at capacity) affect your price recommendations?
  • Which products should the company attempt to sell in New York–New Jersey? Explain.

HINTS and Additional Notes:

  1. Most of the information can be found in the tables and notes, but other information used in this case is located in the case text, or even in the case questions. For example,
    1. Operating costs are a product of the machine time (setup + operating) and the variable cost per machine hour.
    2. The variable cost per machine hour can be found in the income statement
    3. The setup and run times can be found in Exhibit 4 (Operating Information) This table has much useful information on the various operating times for this case.
    4. Many of the recorded costs in the Exhibits are normalized to 1000 bottles. Please remember to adjust these costs to a per-bottle cost.
  2. The easiest way to approach this case is to find the cost per bottle, and then multiply it by the order quantities
    1. The text asks that you analyze two different ranges of orders: 5,000 to 10,000 and 100,000 to 249,000; the appropriate numbers to use then are 7,500 and 175,000
    2. Remember that the order size affects the cost whenever there is a fixed cost. For example, a fixed setup time has a smaller per-unit cost when a large order is made.
    3. The Cost Analysis Resource summarizes all of the data details from the case study from the text.  It can be extremely helpful when making the assumptions necessary to complete your calculations.  
  3. Scrap costs and shipping costs can be found in Exhibit 3. Note: that scrap and shipping costs are also normalized for 1000 bottles, as are many of the costs
  4. Always explicitly state your assumptions when you do your calculations. This will help both you and your instructor understand how you got the numbers you submit.

Please submit your completed assignment as a word document by clicking on the assignment link to access assignment dropbox.  

Do not respond with a question and answer format; however, you can use the questions at the end of the case as a guide.

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