Question

Garland Chocolates Shanti Suppiah, director of operations at the Garland Chocolates plant in Durham, North Carolina, was preparing for a team meeting scheduled for Monday, March 18, to decide what to do about declining margins for the Edgeworth Toffee brand. Options were to invest in new equipment or outsource manufacturing and packing. It was Wednesday, March 12, and Shanti needed to prepare her analysis and develop a recommendation prior to the meeting. Garland Chocolates Headquartered in London, UK, Garland Chocolates (Garland) was a leading global food manufacturer with annual revenues of $3 billion. The company pro- duced a wide range of chocolate and confectionary products, under more than 65 brands. It operated more than 50 plants globally, including eight plants in the United States. Garland's products were among the leading brands in the industry, and the Durham plant manufac- tured 20 product lines that were distributed to retail customers in North America, including grocery store chains, boutique candy shops, and convenience stores. Garland's brands were managed by Cross-functional teams with representatives from sales and marketing, operations, finance, engineering, purchasing, and distribution. Each team was governed by corporate goals for growth, profitability, and brand management, but was given significant autonomy to make strategic and tactical decisions in order to achieve their business performance objectives (BPOS). The competitive nature of the industry placed an upper limit on prices, so margins were determined by production and supply chain efficiencies. Consequently, cost control and continuous improvement were high priorities. The company's enterprise resource planning (ERP) system generated weekly BPO reports for team members. The Edgeworth Toffee Brand Production of Edgeworth Toffee was a two-step process: manufacturing and packing. The product was manufactured in two formats. The first format was a fixed-size, retail-ready pack, which contained a half-pound of toffee. The second format was a 10-pound bulk package that was placed in stores so that customers could select the amount of toffee they wanted and self-pack the product. Production of the fixed-size format was approximately 2,500 cases a year, compared to approximately 3,000 cases a year of the bulk format. Both formats sold for $145 per case. There were two dedicated packing lines for Edgeworth Toffee, one for each format. How- ever, the packing lines had long outlived their useful lives, and efficiencies had declined in recent years (see Tables 1 and 2). The efficiency is defined by the ideal labor hours for a certain item divided by the actual number of hours worked. There was one manufacturing line for Edgeworth Toffee. The Manufacturing and Packing Line Replacement Options The accounting de- partment set standard costs for each product line annually. Table 1 provides the standard costs for Edgeworth Toffee, and Table 2 shows actual operating performance data for the manufacturing and packing lines. As shown in Table 2, the packing line was operating at

Answer 1

As question contain multiple question answered first one only.

calculation Calhen based on mag. & stundared cost Packing lines are replaced a 1. Annual 7.97,500 sales C 5500X $145) 35575 15950o 7175 398753 Annud mate.cost (5500x 24.65) Annual Rock. Cost CS500 x 79.00) Annual labour cost memfa CISOOX 12.05 ) • Packing (55000 7.75) • Annual cost incurred by scrap Mat + Labour (W.N.OR-after mfa ( 68 x4.65 +13:05] (W. N.op) after packing (67x [29.00 +7,25) Annual overhead rN.03 2563.60 24228.75 198625 Total cost 610342.35

(N.N.01] lost in scrap- in packeging output scrap up to pret (?) CRY. X 100) (baltig) therefore s500 (2) (?) a scrap 5500X1.& 98.8 = 66,80 67.00 5500 +6725567 total pood.-my csold 2 scrap)

به د الر حمام Lost in Sayo mag. input Scray Output 5500 Solo Scooup. Pacen + total production G+ 5567 9828 let. CroRy & 100) scrup = 5567 X 102 98.8 = 64.62 68 total material should have been entored - 5567 68 = 5635 Clot's verify - RM srap (5635x1.2x) 5635 a(68) 5570 (67) 5503 (Shop (5570 1.29) extra 3 units due to Round off)

Annual overhead cost :- Annual Packing main.cost Annual meg. main cost $2000x2 = 4000 3000 119625 overhead (21.75x5500) cost of capital Packing (1,4000 oxlor) *Mfg (6,00,000x107.) 14000 60,000 998625