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Exhibits - Exhibit TN-I Process Analysis tor Hammond Cards...

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Unformatted text preview: Exhibit TN-I Process Analysis tor Hammond Cards Process Time SebUp Time Lot Size Work Stations Cycle Time Capacity Step I 0.0 1 100 2 0.0000 50.000 Step 2 0.04 0 1 4 0.0104 43,201] Step 3 0.063 0 1 5 0.0105 42.357 Step 4 0.02 0 1 2 0.0100 45,000 Step 5 0.02 0 1 2 0.0092 49,091 T-Put 1.9325 Capacity Utilization Capacity Utilization Direct Machine Capacity @ may @ 31000.10“ Labor Time Step 1 50.000 04% 14% 0.010 0.1103 Step 2 43.200 01% 85% 0.042 0.042 Step 3 42.051 90% 06% 0.053 0.053 Step 4 45,000 93% 82% 0.02 0.02 Step 5 49,091 86% 15% 0.010 0.018 Total 0.151 0.141 Exhibit TN-1A Process Analysis lor Creative Designs Process Time Set-0p Time lot Size Machines Workers Cycle Time Capacity Step 1 0.0 1 1M 1 1 0.010 25.1”} Step 2 0.03 0 1 2 2 0.011r 21,000 Step 3 0.03 0 1 2 4 0.013 36,000 Step 4 0.03 0 1 2 2 0.013 33.750 Step 5 0.04 0 1 3 6 0.013 33,750 Step 5 0.02 0 1 2 2 0.012 38.57} Step 1' 0.42 0.25 20 2 4 0.01? 27.000 T-Put 2.515 Capacity Capacity Utilization Capacity Utilization Direct Machine 450 @1000Wday @ 1mm labor Tim 25.000 22% 30% 0.010 0.008 21,000 61% 28% 0.0333 0.0333 36.000 50% 21% 0.05 0.025 33.750 53% 22% 0.0257 0.0267 33,750 53% 22% 0.08 0.04 30,571 41% 19% 0.0233 00233 22,000 61% 20% 0.0567 0.0200 0.290 0.1722 IMA EDUCATIDIHAL CASE JCURNAL m VOLUME1,NG.1,ART.1TN,MAHCH2000 Exhibit TN-Z Demand Analysis for Hammond Catds Daily Production Net Martin's Demand Monthly {Average} Rate Inventory Target Transierred January 1,000,000 50,000 42,000 —8,000 37,000 13,000 February 060,000 43.000 42.000 —1,000 37,000 0,000 Marc h 540,000 32.000 42,000 10,000 37,000 0 April 1,040,000 52.000 42.000 ~1 0,000 37,000 15.0% May 720,000 36,000 42,000 0,000 37,000 0 June 0171000 30,000 42,000 12,000 37,000 0 July 520,000 26.000 42,000 15,000 37,000 0 Aug ust 540.000 27.000 42.000 15,000 37,000 0 September 000,000 30.000 42.000 12,000 37,000 0 October 620,000 31,000 42,000 11,000 37,000 0 November 1,000,000 53.000 42.000 -1 1,000 37,000 10,000 December 1,080,000 54.000 42,000 —1 2,000 37,000 17,000 Total Annual Demand 3,200,000‘ 10,030,0002 40,000“ 3,000,000‘ 1,340,0005 Estimated Finished Goods 000,000‘i 1300,0007 : Annualized demand El'urt‘anlcdl. IIIIII "1h nunnnl iirlitillt'ritltl @ 42.001! unite-flu}: which results in eat-unified finished 3.1mm; illVBr-inry ryFHiIEIJinla lilrirfi "l'luh is the net tdaily} impact no inventor crtmi tin: 12 months. We encourage students (rs annualim (Irene cfltilndtte hur smut: will :h'e tl:erJ.-Ii1_\'appmuth. am we include thishcru.'1‘hc “emf-10.11110 is equal in the 800.0131! figure when annualized by Ell days pL'r mnnrh (1.1;. 40,000 unlit. ’ 211duys per mmuii - 31111311101}. " 'I‘ornl annual pmductmn UP 17.0011 uninfdny is 5.300.000. " Tut-1| :Inlmzll prlnlmrrirm :Jf llnmnusnd {Jeni pnklm'tfi [inklllt‘lfli ar Crcflriri: Designs fnllnn-i ng the demand tliif‘r pmprw-JI. ‘1"nrucastulfininliulinnnlx invenuny iannual] i5 311111.110”unirsl1[LlJPSllJllltl—‘JJl’lllJl‘lEJl. '- 'l‘0l:.ll Hammond {lard pmduclinn with the demand. shill int-reuse: to 10.010000. which results in lamented finished goods inventory 011100.000 lllllu 18.01.10.100 + 1.540.000 - ”.EHOJIUBI Exhibit TN-3 Demand Analysis lor Creative Design Overflow Total 0|] Total (:0 Utilized Monthly‘ il‘ailyI 1 Demand 3 Demand ' Capacity 5 0ap.Util.‘ wronly 00’ Ja nua ry 200,000 100% 13.000 23,000 25,000 92% 40% February 240,000 12.0% 6,000 10,000 25,000 72% 43% March 200,000 14,000 0,000 1 ‘1,000 25,000 55% 55% Arpil 180,000 9,000 1 5,000 24,000 25,000 95% 35% May 320,000 15,000 0.0% 10,000 250% 54% 04% Ju ne 340,000 17,000 0,000 17,000 25,000 00% 58% J0 11; 350,000 13,000 00% 10,000 250% 72% 72% August 220,000 1 1,000 2,000 1 1,000 25,000 03% 58% September 340,000 17,000 0,000 17,000 25,000 68% 03% October 220,000 11,000 0,000 11,000 25,000 44% 114% November 160.0% 8,%0 16,000 24,000 25.0% 05% 32% December 150,1]% 7,500 17,000 24,500 25.0% 03% 30% Total 3.010.000 ' 3,010,000 5 1,340.01]! 1“ 4.350.000 “ =I-.iliriii]11y demand an Creative Designs. iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii - -- ---- -' I'Jniéy demand [mnnrhly demand [21: days per month). I Nut new demand tmmferrml i'mm liamnmnil Cards under the dent-Jan! shift pn‘nmsal. ' 'l hlal demand equuh [111: mm: :If (:Icntivc chimr daily demand and transferred 1 Inmmrmd Card} demand. ‘ anl TN-Z. rhi< is the capacity :u the Imrrlcneck «rep for (Creative Dexigns. * This; 1": the: eupat-irg- utilizarinn tnmnthly} for rlu: merged (mmlr demand m-ennriu. '- 'l'lli.’< in Lllt.‘ unpacin utilization [rnrsntlrlfi i'nr ( Ire-31in; l'lcnlfllh demand only. :' 'Jhuldemnnd(mun-.111 l'lJr lircutin: Design [mid llt'in. " 'T'mal prmlm-riun {annual} frn'Creaur'e Dexigns producer. :1' I l illfll {lmdut‘tism llrl lamnaund Card's products :11: Creative Designs under [11c demand :‘Itil't prrpmal. :' 'l‘nral pruducrinn :ll Clearite Designs under Lin.- demand .Vlllrt pmlmnl. [MA EDUCA'HONAL BASE JOURNAL m VOLUME 1, ND. 1. ART. 1TN, MARCH 2000 Exhibit TN-IIA Process Variance Analysis for Creative Designs Creative Designs Hun Chart W _ 13.020 l ‘ m i. l .. um _ IL- ' WYEIWYIVIH 17.090 . I . 17.900 17.970 17.960 14 710131619222528313437404345435255506164 "- 83 Card Length — Sample Mean Creative Designs Histogram 30 25 ,_ 20 2 3 15 3 E 10 u I I I l I I 17.93 17.99 17.995 13 13.335 13.31 13.015 13.32 More IMA EDUCflTIGNRL CfiSE JOURNAL VOLUME 1. ND. 1, AFIT. ITN, MARCH 2000 Exhibit TN-4 Process Variance Analysis fora Hammond Cards Hun Chart 18.030 10.020 10.010 18.000 11.990 17.030 141'1013161922253313431404346495255506164 — Hammond Bard Length — Sample Mean Hammond Cards Histogram 30 25 ,_ 20 2 g 15 5' 2 an 10 5 0 17.904 17.99125 10.0005 10.00375 10.00? 10.01025 10.0135 13.01615 More Bin "all EDUCfiTlDKfiL CASE JDUBNHL a VOLUME1,NU.I,AHT.ITN,MAHEH 2003 Exhibit TN—5 Cost Structure Analysis Source Hammond Creative Hammimrl Creative Date Item Date Total Total Combined Per Unit Per Unit Average Price Ex. TN—SA 13,000,000 00.34 $0.152 Production Ex. 5 10,000,1110 3,000,011] 5,555,000 Sales Revenue 33,400,030 2,255.01!) lVariable Bests 500.150 Card Stock Ex. 5 431,500 131,250 310,400 0.0430 0.0430 Ink Ex. 5 212,500 105,000 32,500 00213 0.0353 Envieope Ex. 5 25,000 1,500 50,500 00025 0.0025 Variable Overhead Ex. 5 45,000 13,500 5,500 0.0045 0.0045 Packing Materials and Supplies Ex. 0 1,000 3,100 1,043,550 0.0002 00012 Total Variable Costs 101,000 251,050 4,512,350 0.0182 0.0573 Contribution Margin 2,510,200 1,094,150 0.2510 0.5521r Fixed Com 205,500 Non Printing Labor 12} Ex. TN-SB 05,120 112,040 385,320 0.0001 00315 Print La her i2} Ex. TN-5B 145,080 240,240 44,000 0.0145 0.0001 Building Rent and Occupancy Costs Ex. 5 31 8 105,250 20,001] 400,000 0.0024 0.0051 Indirect Labor, Plant Administration, Etc. Ex. 5 324,000 115,000 150,030 0.0324 0.0503 Customer Sales and Support Salaries Ex. 8 211,850 550,150 450,000 0.0210 01834 General Administrative Salaries Ex. 8 305,130 155,011] 141,500 0.0305 0.0511 0 epreciatien - Dffice FurniturelFixtures Ex. 8 48,300 43,100 02.1010 0.0040 0.0145 Depreciation — Equipment Ex. TN-5C 000,000 252,500 1,250,500 0.0000 0.0815 Total F0450 Costs 2,241,200 1,524,550 3,055,850 0.2241 0.5410 Total Costs 3,023,000 1,005,530 4,900,530 0.3023 0.5200 Praiit 311,010 350,410 140,410 0.0311 0.1212 Kev Financial Indicators Return on Sales 11.1% 15.4% 13.2% Breakaven {BE} Point in Units @ Mix 0,550,010 2,444,150 10,005,050 BE asPercent of Current Demand 85% 02% 84% Exhibit TN-SA Weighted Average Price Calculation Hammond Average Price Creative Designs Average Price Low end 80% @ 32 cents Law and 10% @ 32 cents High end 20% @ 42 cents High end 00% @ 00 cents IMA EDUCATIONAL CASE JOURNAL VOLUME 1, N0. 1, ART.1TN,MAFICH 2000 Exhibit TN-EB Production labor Non-Print Paid Hours per year per worker Annual wages perworker Number of workers Total wages per year Print Paid Hours per year per worker Annual wages parworker Number olworkers Total wages peryear Exhibit TN'SC Depreciation Schedule Machine Type Template Cutting Printer #1 PrinteriiA Printer #2 Printer 22A Foldingl'UPC Code Scanninngackaging Total Cost $295,000 450,900 450,900 400.1110 410,000 Hammond Creative 2.000 2,080 $16,120 $10,120 6 3' $96,720 $112,040 2,000 2,080 $16,120 $17,160 9 14 $145,000 $240,240 Hammond Cards Creative Designs Cost Per Total Cost Per Machine Quantity Coat Depreciation Machine [loam $295,000 2 $590000 $59,000 $295,000 1 950,000 4 175.000 2 ru'a 225,000 2 950,000 5 4,250,000 415,000 225.000 2 m'a 1130.000 3 205,000 2 410,000 41,000 205,000 2 215,000 2 430,000 43,000 95.000 2 $990,000 $1 £80,000 Depreciation $29,500 45,000 45,000 40,000 41,1100 19,000 $252 500 IMA EDUCfiTIDNkl CASE JDUBNfil E VOLUME 1,ND.1,AF1T.1TN, MARCH 2001! Exhibit TN-E Production Cost Hammond i’lant Using ABC Machines 2 4 5 Workers 2 4 5 Template Background Foreground Folding,f Scanning! cutting printer #1 printer #1 UPC code Packaging “MI Direct labor {see Exhibit TN~EBl 32,240 54,430 00,600 32.240 32240 $261,800 Variable overhead {based on ii of workers} 0,000 12,000 15,000 6,000 5,000 $45,000 Building rent, heat, etc. l[based on ii of workers} 3,200 6,400 8,000 3,200 3,200 $24,000 indirect labor, Plant Admin. etc. {based on ii‘ of machines} 43,200 86,400 100,000 43,200 43,200 $324,000 Depreciation [see Exhibit TN-SC} 53,001] 330,000 475,000 Ill-1,000 43,000 $998,000 Total Activityr Cost $143,640 $545,280 $085,600 $125,640 $127,540 $1,632,000 Cost Drivers [See Gese Exhibit 0} —w.—_.___—_—_umm—l Number of card stock sheets used 500,000 Number of print impressions 10,000,000 Number of print impressions 10,000,000 Number ol folds 10,000,000 Number of packages produced 500,000 Activity cost per unit of driver $0.29 $1.05 80.0? 80.01 $0.215 IMA EDUCATIONAL CASE JOURNAL m VOLUMEi,NU.1,AFIT.1TN,MARCH 2000 Exhibit 110-? Production Cost Creative Plant Using ABC Machines 1 2 2 2 3 2 2 I4 Workers 1 2 4 2 5 2 4 21 Template Background Foreground Foreground Folding! Scanning! Cutting pri liter #2 printer 111 printer #2 UPC code Packaging Dire ct labor 15.120 58,640 34,320 102.960 32,240 54.430 $353,030 Variable overhead 904 1,929 1,929 2,393 1,929 1,929 $13,500 Building rent, heat. etc. 1,429 2,35? 2,35}I 4,285 2.357 I 2,351' $20,000 Indirect labor, Plant Admin. etc. 3,333 33,333 15.55? 50,000 15.057 33.333 $115,000 Depreciation 29.500 45,000 45,000 43,003 41.000 19.000 $262,500 Total Activity Cost $55,340 $151359 $100,712 $203,139 094.692 $121,599 $324,030 Cost Driver Number of card stock sheets used Number of print impressions Number oi print impressions Number of print impressions Number of print impressions Number of folds Number of packages produced Activity cost per unit of driver Exhibit TN-B Activity Based Costs oi Combined Sales and Administration Activities Customer Order Order Pack 8: Billing 8: General Best Driver Catls Processing Picking Ship N? Administration Salaries and Wages {See Exhibit 3c] 500,000 56,000 52,200 34,000 115,000 460,000 Variable Packing Supplies and Boxes 5.500 Equipment Depreciation [Allocated on FTE] 11.480 10.120 1.360 24.340 10.320 22.000 Occupancyr Costs {Allocated on Space Used] 13.215 7,315 03,425 19,115 25,075 19,175 Total Activity Cost $530,155 $83,495 5122.935 5114315 9150.195 $501.25 Best Driver lSee Exhibit 98] No. of Customer Contact Hours 15,210 No. of Orders 9.600 No. of Different Card Styles Shipped 165,600 No. of Boxes Packed 24.400 No. of BillingTransactions 10,130 Cost per unit at driver $34.51 $8.10 $0.15 83.45 $14.10 IMA EDUCATION“. BASE JOURNAL VOLUME1.NO.1.ART.1TN.MAHCH2003 Exhibit TN-B Production Cost Comparison of Proposed Complex Card Hammond Cards Plant Creative Designs Plant Drivers Cost Per Total Drivers Cost Per Total Used Driver Unit‘ Cost Used Driver Unit” Cost Production Batch Size in [lordsa 2,500 2500 Production Cost Card Stock [2.600 x 20115 sheets! 3,333.33 00.044 6145333 3333.33 30.044 $145,833 ink 2,500.00 0.0213 08.13 2,500.00 0.0353 38.25 Enveiope lSee Exhibit TN-51 2,500.00 0.0025 6.25 25151.00 0.0025 6.25 Template Cutting? 166.61 0.2313 41.38 166.61 0.3156 62.61 Printer 1 12,500 cards x 2 print runs] 5,000.00 0.0549 214.64 2,500.00 0.0303 15.64 Printer 1 Back 2,500.00 0.0566 120.41 Printer 2 {2,500 c ards x 2 print runs] 5,000.00 0.0631 343.30 2,500.00 0.0336 83.38 Printer 2 Back 2,500.00 0.0691 113.45 FoldinQJU PC 12.500120 cards per box} 5,000.00 0.0126 62.32 5,000.00 0.0316 151.32 Packing 12.500120 cards per boxi 125.00 0.2553 31.31 125.00 0.3101 101.33 Production Cost per Batch 930.16 1,021.33 Production Cost per Card $0.332 30MB Difference 40.0115 Turin at .iiii am is mm from Exhibits'l‘V-S.‘1'V-fl. mi ‘rw .Ind m: Exhibit :1 : Iiirui oFJ.5[l(l rurdii dir ided h\' 1.5 cards per hue-5; sheer. ’ .'\.\Sl.lll'|t‘a (hilt itll2.."1lfl)urda will In: produced in involunn' in one h.lu‘|:. 0! \‘flllivt‘th‘IY (here are no nor up casts Fur doing; it in live biirclics nl'filfll each. i“Exhibit TIN-10 Customer Support Cost Comparison oi Selling Through Biiierent Channels Mass Sales Channel Niche Sales Channel Drivers Cost Per Total Drivers Cost Per Total Used ‘ Driver Unit ' Cost Used ‘ Driver Unit 1 Cost Order Size in [lauds3 2,500 500 Customer Support 0051 Customer Calls 0.95 34.30 33.50 1.92 34.90 51.00 Order Processing 100 3.10 8.10 1.00 3.10 8.10 Pick Cards 20.00 0.15 14.91 10.00 0.15 1.45 Pack and Ship 5.00 3.46 11.23 1.00 3.46 3.40 Bill Customers 1.00 14.18 14.10 1.00 111.18 14.18 Customer Support Cost per Order $39.13 $101.39 Customer Support Cost per Bard $0.036 $0.203 Difference $0.167 - mm mg.- information (0mm from Cow livhihit n "I'ht: ralriiliil'inri "Fa-at rirircn per imir is in Iivhihit 'l'X-N. 't'Iu- anaiysis is 1:0 unre- no I'm all 3.34m min. will he .iliimiL-il in am- urtiur nu [Innlrimrrr]; (Irearirc t‘uxrrmlcrs “in ruruliru livc nrllcrs «int-.- nun- sun mu. en; lilljclul. IMA EDUCATIDNIL CASE JOURNAL m VOLUME 1. N0. 1, ART. 1TN. MARCH 2003 Exhibit TN-11A Comparison of Margin for Production and Sales Channel Option Equal demand volume in both niche and mass market Total Order 2,500 2,500 2,500 2.500 BatchrOrder Size 2,500 2.500 500 500 Margin Per Card Options * Produce Hammond Produce Hammond Produee Creative Produce Oreetive Sell Mess Sell Niche Sell Mess Sell Illche Selling Pric e $0.05 $0.00 $0.05 $0.90 Production Cost 039 0.39 0.41 0.41 Gross Margin 0.20 0.51 0.24 0.49 Customer Support Cost 004 0.20 0.04 0.20 Full Cost per Unit 0.43 0.00 0.44 0.01 Product Margin $0.22 $0.30 $0.21 $0.29 Rank Order 3 1 4 2 Total Product Margin Revenue $1,025.00 $2,250.00 $1,625.00 $2,250.00 Production Cost 900.70 900.10 1,021.03 1,021.03 Gross Margin 044.24 1,209.24 003.3? 1,220.31I Customer Support Cost" 09.10 500.94 89.10 500.94 Fuil Cost per Unit $1,000.32 $1,407.10 $1,110.19 $1,520.57 Product Margin $555.00 $702.30 $514.21 $721.43 Rank Order 3 1 4 2 ' Fur Selling lhrrnlgh thc {Irculivc chariot-1w: need In process 5 rsrtlch' Inf F-EJEI unit». ‘12: \cll 2.51111 units. WI: mail {In multiply (In: pcr luau-h t'u’illlfllcr-fiupflnfill rum 015101.30 Vi - $300.94 Exhibit TN-11B Comparison of Margin for Production and Sales channel Option Mass market volume = 1.5 times niche channel volume Total Order 3,150 2,500 2.3.150 2,500 Revenue $2,431.50 $2,250.00 $2,431.50 $2,250.00 Production Cost 1,471.14 900.70 1,532.44 1,021.03 Gross Margin 900.36 1,209.24 905.00 1,220.37 Customer Support Cost“ 133.75 500.94 133.15 500.94 Full Cost per Unit $1,604.00 $1 $137.70 $1,006.19 $1,520.57 Product Margin $832.02 $752.30 $111.31 $721.43 Flank Order 1 3 2 4 IMA EBUCATIONAL CASE JOURNAL m VOLUME 1, NO. 1, ART. 1TN. MARCH 2001! Exhibit TN~12 Financial Proieotion Model for Post Merger Plan Hammond creative Combined Price $0.415 $0.151 Production 10,000,000 3.000.000 13,000,000 Sales Revenue $4,160,000 $2,253,000 $5,413,000 Variable Costs Card Stock 431,500 131,250 563,750 Ink 2?2,500 105.9% 373,750 Envelope 25,000 1,500 32,500 Variable Overhead 45,000 13,500 53.500 Packing Materials and Supplies 1,300 3,700 5,500 Total Variable Costs 131.300 231.350 1.043550 Contribution Margin 3,313,200 1,991,150 5,369,350 Fixed Costs Non Printing Labor 93,220 112,340 209,560 Print Labor 145,030 240,240 335,320 Building Bent and Occupancy Costs 24,000 20,000 44,011] Indirect Labor, Plant Administration, Etc. 324,000 115,000 499,000 Customer Sales and Support Salaries 212,350 550,150 133,000 General Administrative Salaries 309,000 155,000 450,000 Building Rent and Occupancyr Costs 82,250 32,250 142,500 Depreciation — Office FurniturelFixtures 43,300 43,700 92,000 Depreciation — Equipment 993,000 252,500 1,260,511] Total Fixed Boats 2241,21]! 1,524.0” 3.355.331 Total Costs 3,023,000 1,335,530 4,909,530 Additional Post Merger Savings 55,950 Profit $1,137,000 $355,470 $2,059,430 Key financial Indicators Return on Sales 21.3% 10.3% 32.1% Breakeven {BE} Point in Units 3,331,054 2,447,852 9,359,874 BE as Percent of Productive Capacity 33% 32% 72.0% Exhibit TM 23 Additional Cost Savings Hammond purchased materials savings 10% 117.270 Hammond fixed cost savings 5% 29.49" Sales and Admin Costs Savings 15% 400,200 IIlIA EDUCATIONAL 0A3E JOURNAL a VOLUME 1, NO. 1. ART. 1TN, MARCH 2003 ...
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