...Caitriona Leone & Jordan Crystal 15 October 2012 Giberson’s Glass Studio 1. Come up with an analysis that might help save the business. Edward Giberson is facing a problem with his rapidly deteriorating glass studio. He is not making profit, which is from a combination of not pricing his products correctly and spending too much on costs. I first figured out his total revenue for the year. Giberson’s year is actually made up of 40 weeks or ten months. The following table is what makes up his revenues: Category | Unit Price | # of units | Sales | Patterned glasses | $9.00 | 19*40=760 | $6840 | Paperweights | $15.00 | 10*40=400 | $6000 | Wrapped tumblers | $8.00 | 32*40=1280 | $10,240 | Vases | $25.00 | 8*40=320 | $8000 | Total Annual Revenue: | =31,080 | I then calculated the operating costs for the year, which included his estimated wages of $25,000 for the year and depreciation of the equipment, furnace, truck, and gas tanks. I combined the remaining operating costs together which include advertising, rent, utilities, etc.: Category | Cost per month | Months (40/52)*12 | Operating Costs | Office Supplies | $25 | 9.23 | $231 | Hand Tools/MFG supplies | $150 | 9.23 | $1,385 | Part-time labor | $100 | 9.23 | $923 | Other operating costs | $640 | 9.23 | $7,680 | Truck | $205 | 9.23 | $2,460 | Furnace | $1,000 | 9.23 | $9,230 | Furnace Depreciation | $208* | 12 | $2,500 | Equipment Depreciation | $31.25** | 12 | $375 | Truck Depreciation |...
Words: 1126 - Pages: 5
...GIBERSON’S GLASS STUDIO CASE SUMMARY Edward Englehardt Giberson, the proprietor, is a skilled glassblower whose business is on the verge of bankruptcy. He works in his studio almost every day, and his products are selling reasonably well. On average, he has at least a two-week backlog of orders. He realizes his prices are too low, yet the artistic nature of his products makes it difficult to set prices based on any systematic assessment of demand or comparison with similar products. In desperation, he turns to the consulting club of a nearby graduate business school for help in establishing both a pricing policy and a production policy that he hopes will lead to profitable operations and a positive cash flow. Clearly, continuing ―business as usual is not an option for Mr. Giberson. TEACHING OBJECTIVES This is a fascinating case that most students find to be enjoyable and engaging. They can appreciate the artistic mentality of the proprietor, and they can relate to his products and his business processes. The financial data, although not well organized, are understandable, and the case text is reasonably short. Thus, students can really focus their attention on trying to come up with the kind of analysis that might help save the business. This case is intended for use early in a course module pertaining to cost behaviors, product costing, and relevant costs. In analyzing the case, students will need to prepare an annual income statement, so the case can also be...
Words: 488 - Pages: 2
...Giberson’s Glass Studio Giberson is a skilled glassblower facing financial difficulties in his business. His resources are draining out quickly due to the following reasons – Lack of proper bookkeeping following his divorce, since his wife used to take care of the activity He has no knowledge which of his 4 items – glasses, paper weights, tumblers and vases – is profitable He is in dire need of a better pricing strategy to maintain profits after accounting for costs and his wages Looking at the available data, Giberson seems to be under-utilizing several of his resources, namely raw materials and time in addition to inefficiently pricing the products. Let us look at each of these factors separately. Raw Materials Let us calculate the total weight of raw materials used to produce the 4 items and compare that with the total weight of raw materials available Weight / piece (lbs) Patterned glasses 0.5 Paperwights 0.9 Wrapped tumblers 0.5 Vases 0.6 Item Weekly Production 19 10 32 8 Total Weight (lbs) 9.5 9 16 4.8 39.3 The total weight of raw material used = 39.3 lbs. The total weight of raw material scrapped = 50 lbs. Batch size available = 200 lbs. Percentage utilization = (39.3 + 50)/200 = 45% Cost/ batch = $21.42. Cost/year = $21.42*40 = $856.80 Recommendation – Giberson is reluctant to reduce the quantity of the batch to preserve quality. If he can half the quantity while still preserving the proportion of ingredients, he can save $428.40 per year Time Let us...
Words: 1007 - Pages: 5
...Background Giberson is a skilled glassblower whose business is a bit confusing. He works in his studio almost every day, and his products are popular and unique. He currently produces paperweights, tumblers, patterned glasses and vases. He is considering expanding his product line, or taking on custom work (one of kind orders) as customers have asked him to do this in the past, but he has not done so as yet. Because of the product cost mess he has no order in management. He realizes his prices are too low, but he cannot figure out the product price structure and a course module pertaining to cost behaviors, product costing, and relevant costs. As a result, it is hard for him to give the exact price for four different kinds of glasses. Also, he only has a few thousand dollars. If he does not sell the products on time he will run out of money. The main solution is to know about production schedule, the financial budget, direct labor cost and his timeframe .In analyzing this case, firstly, we need to thoroughly understand the production procedure, an annual statistics income statement. Secondly, we need to compute products variable costs and fixed costs. But in this case, the fixed cost is complicated. One type that occurs is only during the periods when Giberson is blowing glass not while during his vacation, such as total gas used. Another that exists is irrespective of production, such as truck loan interest, crucial facilities’ depreciation. Cost Analysis I started...
Words: 523 - Pages: 3
...Background Giberson is a skilled glassblower whose business is a bit confusing. He works in his studio almost every day, and his products are popular and unique. He currently produces paperweights, tumblers, patterned glasses and vases. He is considering expanding his product line, or taking on custom work (one of kind orders) as customers have asked him to do this in the past, but he has not done so as yet. Because of the product cost mess he has no order in management. He realizes his prices are too low, but he cannot figure out the product price structure and a course module pertaining to cost behaviors, product costing, and relevant costs. As a result, it is hard for him to give the exact price for four different kinds of glasses. Also, he only has a few thousand dollars. If he does not sell the products on time he will run out of money. The main solution is to know about production schedule, the financial budget, direct labor cost and his timeframe .In analyzing this case, firstly, we need to thoroughly understand the production procedure, an annual statistics income statement. Secondly, we need to compute products variable costs and fixed costs. But in this case, the fixed cost is complicated. One type that occurs is only during the periods when Giberson is blowing glass not while during his vacation, such as total gas used. Another that exists is irrespective of production, such as truck loan interest, crucial facilities’ depreciation. Cost Analysis I started...
Words: 523 - Pages: 3
...Background Giberson is a skilled glassblower whose business is a bit confusing. He works in his studio almost every day, and his products are popular and unique. He currently produces paperweights, tumblers, patterned glasses and vases. He is considering expanding his product line, or taking on custom work (one of kind orders) as customers have asked him to do this in the past, but he has not done so as yet. Because of the product cost mess he has no order in management. He realizes his prices are too low, but he cannot figure out the product price structure and a course module pertaining to cost behaviors, product costing, and relevant costs. As a result, it is hard for him to give the exact price for four different kinds of glasses. Also, he only has a few thousand dollars. If he does not sell the products on time he will run out of money. The main solution is to know about production schedule, the financial budget, direct labor cost and his timeframe .In analyzing this case, firstly, we need to thoroughly understand the production procedure, an annual statistics income statement. Secondly, we need to compute products variable costs and fixed costs. But in this case, the fixed cost is complicated. One type that occurs is only during the periods when Giberson is blowing glass not while during his vacation, such as total gas used. Another that exists is irrespective of production, such as truck loan interest, crucial facilities’ depreciation. Cost Analysis I started...
Words: 523 - Pages: 3
