Case Study-AW530

Case Study-AW530 Online Services

 

The Case

 

You are a Senior Consultant for the professional service firm, BUSI 2083 LLP. Your firm specializes in providing a wide variety of internal business solutions for different clients. It is your final week on the job and a Manager asks you for some help prior to your departure. Eager to leaving a lasting impression, you start reading the background information provided by the Manager.

 

Lesley Donovan is the controller for the East division of Explorer Ltd. Jason Conner, head of plant engineering, has just left Donovan’s office after presenting three alternatives for submission in the capital expenditure budget for the fiscal year 2014. The budget is due to the CEO in two days and therefore Donovan realizes that time is of the essence.
 
Conner has outlined the following alternatives to replace an outdated milling machine: (1) build a general purpose milling machine; (2) buy a special purpose numerically controlled milling machine; (3) buy a general purpose milling machine.

 

Explorer Ltd. Is a well-established company. The company was set up about 30 years ago by two brothers Dan and Kevin Thompson, in Huntsville, Ontario, to produce accessories for the automobile industry. The Central division continues to serve the auto industry, and is the largest division in the company with sales of $35 million annually. Dan’s son is now head of this division. Kevin is still active in the company and is the Chief Executive Officer (CEO). His office is located in Toronto.

 

The parts division supplies seals to the mining and petrochemical industry from a plant in Toronto. This division is only ten years old and until 2010 was highly profitable. As a result of the downturn in the sector of the economy, sales in 2012 were only $12 million.

 

The East division, located in Scarborough, is the engineering division. Full time employees tend to work approximately 2,000 in the division. Regular product lines include industrial fans, industrial cooling units, and refrigeration units for industrial users. The division is highly capital-intensive and sales tend to be directly related to general economic conditions.

 

Each division runs independently and performance is based upon budgeted return on investment. Bonuses are paid if the budget target is achieved. Annually, each division prepares a detailed budget submission to Kevin, outlining expected profit performance and capital expenditure requests. The milling machine proposal is part of the capital expenditure request.
 

Sales$22,364,000
Cost of Goods Sold14,760,240
Gross Profit7,603,760
Selling and General Administrative Costs3,578,760
Allocated Costs (based on sales)1,677,300
  
Income Before Income Taxes$2,348,220
Return on Sales – 10.5% 
Return on Investment – 8.5% 
Investment (Historical Cost)$27,626,118

 

You can read more about our case study assignment help services here.
 

How it Works

How It works ?

Step 1:- Click on Submit your Assignment here or shown in left side corner of every page and fill the quotation form with all the details. In the comment section, please mention Case Id mentioned in end of every Q&A Page. You can also send us your details through our email id support@assignmentconsultancy.com with Case Id in the email body. Case Id is essential to locate your questions so please mentioned that in your email or submit your quotes form comment section.

Step 2:- While filling submit your quotes form please fill all details like deadline date, expected budget, topic , your comments in addition to Case Id . The date is asked to provide deadline.

Step 3:- Once we received your assignments through submit your quotes form or email, we will review the Questions and notify our price through our email id. Kindly ensure that our email id assignmentconsultancy.help@gmail.com and support@assignmentconcultancy.com must not go into your spam folders. We request you to provide your expected budget as it will help us in negotiating with our experts.

Step 4:- Once you agreed with our price, kindly pay by clicking on Pay Now and please ensure that while entering your credit card details for making payment, it must be done correctly and address should be your credit card billing address. You can also request for invoice to our live chat representatives.

Step 5:- Once we received the payment we will notify through our email and will deliver the Q&A solution through mail as per agreed upon deadline.

Step 6:-You can also call us in our phone no. as given in the top of the home page or chat with our customer service representatives by clicking on chat now given in the bottom right corner.

Case Approach

Scientific Methodology

We use best scientific approach to solve case study as recommended and designed by best professors and experts in the World. The approach followed by our experts are given below:

Defining Problem

The first step in solving any case study analysis is to define its problem carefully. In order to do this step, our experts read the case two three times so as to define problem carefully and accurately. This step acts as a base and help in building the structure in next steps.

Structure Definition

The second step is to define structure to solve the case. Different cases has different requirements and so as the structure. Our experts understand this and follow student;s university guidelines to come out with best structure so that student will receive best mark for the same.

Research and Analysis

This is the most important step which actually defines the strength of any case analysis. In order to provide best case analysis, our experts not only refer case materials but also outside materials if required to come out with best analysis for the case.

Conclusion & Recommendations

A weak conclusion or recommendations spoil the entire case analysis. Our expert know this and always provide good chunks of volume for this part so that instructors will see the effort put by students in arriving at solution so as to provide best mark.

Related Services

 

Jason Connor has pointed out to Donovan that the existing machine is not only outdated but maintenance costs are becoming prohibitive. Jason also noted that maintenance costs of new general purpose machines are only $26,000 while special purpose machines can save an additional $14,000 in maintenance. Also there would be a significant savings in insurance as the price for a general purpose machine would drop to $3,000 while a special purpose machine would be 67% higher than the general purpose machine. The machine has no market or salvage value and he is sure that its book value is now zero. The trouble is that he doesn’t know which proposal is best for the company. In addition to the cost and revenue date provided, Connor provided comments on each alternative below:

 

1)   Build a general purpose machine
 
This machine can be built by East division. The division is below capacity at present as a major contract has just been completed. The division could thus produce the machine without affecting revenue-producing activity, but it will take six months to complete. The machine is expected to last five years and have no salvage value because removal costs will probably equal selling price.

Connor believes that the division has the technical expertise to undertake the work. In 2012, the division produced a specialized drilling machine that has proven very successful. Connor pointed out that David Williams, chief engineer, loves the design challenge of new machines. Donovan sat down with Connor and produced the following cost estimates
 

Material and parts$55,000
Direct labor (DL$)90,000
Variable overhead (50% of DL$)45,000
Fixed overhead (25% of DL$)22,500
TOTAL$212,500

 
Donovan argues that this job should also bear a proportion of administrative costs; she suggests $12,000.

 

2)   Buy a Special Purpose Machine
 
The advantage of this special purpose machine is that only one operator is required and output per hour could increase by 25%. In addition, maintenance costs are significantly reduced because microchip circuitry is employed.

 

Connor points out that this machine is state-of-the-art and would probably mean that new work could be taken on. A numerically controlled machine required extensive training of operators. In total, 26 weeks are spent in the supplier’s factory located in Florida. While the training is going on, the supplier provides an operator to work the machine without charge. Expected costs of this training period including hotel, per diem, and travel will cost $3,000 per week, excluding the operator’s labor which is set at $15 per hour.

 
The machine costs $625,000, and the supplier guarantees the salvage value of $25,000 at the end of five years. It is available immediately. It is estimated the machine can generate sales of $243,750 annually at full capacity and require $19,500 in direct materials cost, which is equivalent to the general purpose machine.

 

3)   Buy a General Purpose Machine

 
The purchase price of this machine is $295,000 and cost levels associated with the machine are expected to be the same as the general purpose machine built by the company because the technology is similar. The salvage value of the machine net of removal costs, is estimated to be $5,000 in five years. It can be delivered immediately.

 

General comments: The required rate of return for this investment class has been set at 8% by Kevin Thompson.

 

Required: Prepare the budget submission to Kevin.

 

product code: Case Study-AW530
 
Looking for best Case Study-AW530 online,please click here
 

Summary
User Rating
5 based on 1 votes