Mariela Tinajero
MBA 6210
Tues 5:30-8:30
Hilton Manufacturing Company
1. If product 103 had been dropped then the original profit of $158,000 would have increased to $574,000. The variance does not
seem to change with the increase nor should it as the only thing that really changed is excluding product 103. The total actual
without product 103 was calculated by subtracting the total standard for product 103 form the Total Actual for all 3 products,
again this resulted in a profit of $574,000.
Product 101
Total at
Standard Standar
per Cwt. d
Product 102
Total at
Standard Standar
per Cwt. d
Product 103
Total at
Standard Standar
per Cwt. d
Total
Standard
(Thousands)
Total
Standard
wo 103
Total Actual
(Thousands)
Total
Actual
wo 103
Var
ianc
e
Varianc
e wo
103
Rent
Property
Taxes
Property
Insurance
Compensati
on
Insurance
Direct
Labor
Indirect
Labor
0.3383
337
0.5856
417
0.0723
365
1119
754
1021
656
98
98
0.1125
112
0.1862
133
0.155
78
323
245
307
229
16
16
0.0941
94
0.1486
106
0.2047
103
303
200
278
175
25
25
0.1486
148
0.162
115
0.1747
88
351
263
348
260
3
3
2.3282
2321
2.274
1619
2.6746
1341
5281
3940
5308
3967
-27
-27
0.7941
792
0.7903
563
0.8947
448
1803
1355
1721
1273
82
82
Power
Light and
Heat
Building
Service
0.0403
40
0.0929
66
0.1171
59
165
106
170
111
-5
-5
0.0269
27
0.0472
34
0.0392
20
81
61
83
63
-2
-2
0.018
18
0.0288
21
0.0288
14
53
39
50
36
3
3
Materials
1.3766
1372
1.7572
1251
1.8862
946
3569
2623
3544
2598
25
25
Supplies
0.0941
94
0.1774
126
0.1363
68
288
220
288
220
0
0
Repairs
Total
Production
Cost
Selling
Expense
General
Administrat
ion
Depreciatio
n
Interest
Total
Cost
Less Other
Income
0.0319
32
0.0557
40
0.0396
20
92
72
88
68
4
4
5.4036
5387
6.3059
4491
6.4232
3550
13428
9878
13206
9656
222
222
1.6397
1635
1.7069
1215
1.8286
917
3767
2850
3706
2789
61
61
0.6209
619
0.485
345
0.6904
346
1310
964
1378
1032
-68
-68
1.0172
1014
1.5955
1136
1.4223
713
2863
2150
2686
1973
177
177
0.0941
94
0.149
106
0.2043
102
302
200
290
188
12
12
8.7755
8749
10.2423
7293
10.5688
5628
21670
16042
21266
15638
404
404
0.0184
18
0.0192
14
0.0192
10
42
32
42
32
404
404
405
405
8.7571
8731
10.2231
7279
10.5496
5618
21628
16010
21224
15606
Actual
Sales (Net)
9.3084
9279
9.69
6900
10.3784
5202
21381
16179
21382
16180
Profit or
Loss
0.5513
548
-0.5331
-379
-0.1712
-416
-247
169
158
574
2. They should drop the price to $8.64. They will lose profit on both but with $8.64 they lose about $1,738,240 while setting the
price to $9.41 will result in a loss of $4,869,092. Below are my calculations I increased material and supply cost by 5%, and
light and heat by 7%. To calculate actual sales I took ((units sales-cash discounts)*price) = (sales * 1,000). Once actual sales
were calculated it was easy to get the profit by taking sales – costs.
Product 101 in 2003
$ per
Thousands Cwt.
Product 101 in 2005
Thousands
$ per Cwt.
Product 101 in 2005
Thousands
$ per Cwt.
Rent
721
0.3383
721
0.3383
721
0.3383
Property Taxes
240
0.1125
240
0.1125
240
0.1125
Property Insurance
201
0.0941
201
0.0941
201
0.0941
Compensation Insurance
317
0.1486
317
0.1486
317
0.1486
Direct Labor
4964
2.3282
4964
2.3282
4964
2.3282
Indirect Labor
1693
0.7941
1693
0.7941
1693
0.7941
Power
86
0.0403
86
0.0403
86
0.0403
Light and Heat
Building Service
57
38
0.0269
0.018
59.85
38
0.028245
0.018
59.85
38
0.028245
0.018
Materials
2935
1.3766
3081.75
1.44543
3081.75
1.44543
Supplies
Repairs
201
68
0.0941
0.0319
211.05
68
0.098805
0.0319
211.05
68
0.098805
0.0319
11521
5.4036
11680.65
5.47848
11680.65
5.47848
Selling Expense
3496
1.6397
3496
1.6397
3496
1.6397
General Administration
1324
0.6209
1324
0.6209
1324
0.6209
Depreciation
2169
1.0172
2169
1.0172
2169
1.0172
201
0.0941
201
0.0941
201
0.0941
18711
8.7755
18870.65
8.85038
18870.65
8.85038
39
0.0184
39
0.0184
39
0.0184
18672
8.7571
18831.65
8.83198
18831.65
8.83198
19847
9.3084
13962.558
5.5859187
17093.376
7.962843
1175
0.5513
-4869.092
-3.246061
-1738.274
-0.869137
Total Production Cost
Interest
Total Cost
Less Other Income
Actual Sales (Net)
Profit or Loss
Units Sales (Cwt.)
Cost
Cash Discounts
2132191
1500000
2000000
$9.41
1.08%
$9.41
1.08%
$8.64
1.08%
3. The most profitable product is product 101. In exhibit 2 it shows that profit is positive on product 101 and the rest show
negative profit. This also seems to be true in 2004 as shown on exhibit 4; product 101 seems to have positive profit while the
others have negative profit. Therefore, I will conclude that product 101 is the most profitable.
Product
101
Cost
Type
Thousands
Product
102
$ per
Cwt.
Thousands
Product
103
$ per
Cwt.
Thousands
$ per
Cwt.
Total Standard Thousands
F
Rent
721
0.3383
603
0.5856
718
0.7273
2042
F
Property Taxes
240
0.1125
192
0.1862
153
0.1555
585
F
Property Insurance
201
0.0941
153
0.1486
202
0.2047
556
V
Compensation Insurance
317
0.1486
167
0.162
172
0.1747
656
V
Direct Labor
4964
2.3282
2341
2.274
2640
2.6746
9945
F
Indirect Labor
1693
0.7941
814
0.7903
883
0.8947
3390
V
Power
86
0.0403
96
0.0929
116
0.1171
298
F
Light and Heat
57
0.0269
49
0.0472
39
0.0392
145
F
Building Service
38
0.018
30
0.0288
28
0.0288
96
V
Materials
2935
1.3766
1809
1.7572
1862
1.8862
6606
V
Supplies
201
0.0941
183
0.1774
135
0.1363
519
V
Repairs
68
0.0319
57
0.0557
39
0.0396
164
11521
5.4036
6494
6.3059
6987
7.0787
25002
1758
1.7069
1805
1.8286
7059
Total Production Cost
F
Selling Expense
3496
1.6397
F
General Administration
1324
0.6209
499
0.485
681
0.6904
2504
F
Depreciation
2169
1.0172
1643
1.5955
1404
1.4223
5216
F
Interest
201
0.0941
153
0.149
202
0.2043
556
18711
8.7755
10547
10.2423
11079
11.2243
40337
V
Less Other Income
39
0.0184
20
0.0192
19
0.0192
78
Total Cost
Actual Sales (Net)
Profit or Loss
CM = sales - vc
18672
8.7571
10527
10.2231
11060
11.2051
40259
19847
9.3084
9977
9.69
10243
10.3784
40067
1175
0.5513
-550
-0.5331
-817
-0.8267
-192
11276
5.2887
5324
5.1708
5279
5.3499
21879
4. The profitable return seems to have been caused by the increase in sales. The total cost actually seemed to go up by about
$1,097,000. However, the actual sales seemed to go up by about $1,348,000. This big difference resulted in a profit for 2004.
1st qrt
2004
2003
2003 (avg 1 qrt)
2042
1021
1021
0
Property Taxes
585
292.5
307
14.5
Property Insurance
556
278
278
0
Rent
Compensation Insurance
Variance
656
328
348
20
Direct Labor
9945
4972.5
5308
335.5
Indirect Labor
3390
1695
1721
26
Power
298
149
170
21
Light and Heat
145
72.5
83
10.5
96
48
50
2
Materials
6606
3303
3544
241
Supplies
519
259.5
288
28.5
Repairs
164
82
88
6
25002
12501
13206
705
Selling Expense
7059
3529.5
3706
176.5
General Administration
2505
1252.5
1378
125.5
Depreciation
5216
2608
2686
78
556
278
290
12
Building Service
Total Production Cost
Interest
Total Cost
Less Other Income
Actual Sales (Net)
Profit or Loss
40338
20169
21266
1097
78
39
42
3
40260
20130
21224
1094
40068
20034
21382
1348
-192
-96
158
254