Zauner Ornaments

Zauner Ornaments - Zauner Ornaments Introduction Zauner...

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Zauner Ornaments Introduction Zauner Ornaments is a wholly owned subsidiary of Zauner Crystal, Inc. Zauner Crystal, Inc. is a large manufacturer of crystal and glass products which is headquartered out of Vienna, Austria. The company was originally established as an industrial-glass producer, but they reinvented themselves after World War II as a producer of fine crystal, glass tableware, and other similar products. The company had a reputation as a producer of high-quality glass and crystal at affordable prices due to the oklskills of its master artisans, as well as the application of innovative technology in the manufacturing process. The company’s products could be found in fine restaurants, hotels, and residences throughout the world. Chai-yi Yu is the new controller for Zauner Ornaments in Taiwan and decided to use the slow sale period in January to review the company’s management-accounting procedures. Zauner Ornaments was created a few years previously when the management at Zauner Crystal, Inc. realized that growth in
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the fine-crystal and glass tableware market was beginning to slow. The company needed to enter into new markets in order to tap into new growth opportunities, so they decided to enter in the glass Christmas-tree ornaments. Their entrance into this market would allow the company to continue to grow as well as utilize their skills with their unique capabilities in the glass and crystal business. Upon entering into the Christmas ornament market the company leased a small manufacturing facility in Taiwan, and began producing the following three products there: Ornaments per Box Sales Price per Box Small glass ball ornaments 12 $ 9.00 Large glass ball ornaments 6 $ 11.00 Specialty glass ball ornaments 1 $ 17.00 In order to determine how the sales department set the prices for the three products Yu contacted the department and discovered that the sales team priced out similar products in the market and then set their selling prices accordingly. Yu knew that the company was profitable overall, but wondered if the prices set by the sales department were sufficient to ensure that the individual product lines were profitable. Yu decided to have a senior analyst prepare an analysis of unit-product costs for each of the three products. This analysis showed that the total cost for the small glass ball ornaments, large glass ball ornaments, and specialty glass ball ornaments were $21.12, $13.56, and $8.43 respectively; but the selling prices were $9.00, $11.00, and $17.00 respectively. This meant that the company as taking a loss on the sale of the small and large glass ball ornaments. Overhead item Annual Cost Production scheduling 85000 Machine setups 160000 Equipment depreciation 220000 Plant depreciation 150000 Quality inspection 70000 Packing 185000 Plant administration 300000 Total overhead 1170000 Zauner Ornaments Calculation of Product Costs: Volume-Based Costing System Product Number of ornaments ornaments per box Number of Boxes
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Zauner Ornaments - Zauner Ornaments Introduction Zauner...

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