need help

hints.ppt

Museum Jewelry
Target Profit Assignment
I have some hints in the notes page of each slide .
To get there, go to view tab, Notes page, you can see what I have written in the notes sections, while the case facts and requirements are in the main PP slide area.

Jane Goodheart is your client!

Write a report that is appropriate for her (based on what you learn about her)

Make it a great week!

This assignment is not about working hard, but working smart. I do not expect you to consider every possible option nor for you to employ every tool we are providing you. Use what you need for this engagement, no more.

The goal always is to consider who your client is and to be cognizant of his/her business sophistication and her needs.

Read cases carefully. Write down the key input or facts of the case, write down what your assignment or goal is, and then re-read the case every day to make sure you are answering the question posed and providing an appropriate solution (not a bunch of possible sophisticated options) . Then support your recommendation as necessary and in a clear, concise, but complete way that your client will understand.

KIS (Keep it Simple)!

Your assignment

You agreed to analyze her business operations and to advise her how to reach her modest goal of earning $25,000 per year, after taxes. After some calculation and some thought, you conclude that Jane has to increase her revenues, perhaps by achieving greater volume, or perhaps by raising her selling price.

Jane just wants a modest outcome for her hard work.

You are given only two recommendations to consider: either increase volume OR Raise the selling price (Both to increase revenue!). NO MORE!!!

Work with the facts given and requirements your client set out for you.

KIS – Keep it Simple!

Evaluate what kind of business

Jane Goodheart established and ran a small workshop that manufactured costume jewelry reproductions of well-known jewelry masterpieces by Faberge and other famous designers, plus antique pieces of Etruscan, Russian, Egyptian, Chinese and French jewelry. She marketed these creations to museums across the United States in batches of 12 assorted items, for which she charged $680 per batch. In turn, the museums sold the jewelry at prices averaging nine times what they paid for the jewelry.

Evaluate what kind of business you are doing the analysis for. What do you think Jane’s likely competition is.?

What is her market? Is hers a mass production operation or a specialized niche market?

Can the market withstand a higher price for her “creations?”

She sells her jewelry by batch of 12 items in a batch. She does not sell partial batches, so discussion of 7.4 batches does not make sense. Also, as she sells by batch, it is not necessary to break costs out per piece of jewelry. (Although knowing the price per jewelry piece did help me to imagine a bit better the product being sold).

KIS and read the case carefully more than once!

A bit about your client

Business was brisk, and Jane could easily sell every batch that she produced. But she found herself earning very little money, and after paying her 28% income tax, she found herself with almost no money to live on. That led Jane to you, as her consultant. She complained to you that she worked very hard, 50 weeks a year, but ended up broke and frustrated. Jane said that her tastes were modest, and emphasized artistry rather than material possessions. She noted that she would be quite satisfied to make $25,000 a year, after taxes.

Think about your audience, the business savvy of your client, their needs, their personality. Can’t you picture Jane in your mind?

Jane really just wants to know what revenue she must have to have $25,000 after taxes by working 50 hours per year, No more. She is optimistic that you, her MBA consultant can give her some good recommendation.

Your recommendations should reflect that you are “listening” to her needs and frustrations..

Jane does not strike me as someone who will have the patience to flip through your vast number of spreadsheets with lots of numbers on it, she is an artist. Keep it simple, but show how you get the numbers you come up with.

Costs per unit: which unit?

Jane's only assistant was Joe, who was paid $15 per hour for his unskilled labor. Jewelry production varied between a low of 4 and a high of 6 batches per week, and averaged 200 batches per year. Each batch cost $80 (excluding wages) to pack and ship, with Joe doing all the packing and shipping. It takes Joe 2 hours to pack and ship one batch. Joe also does other chores, such as sweeping, vacuuming and cleaning, and he averages 20 hours per week of employment with Jane's workshop, for the 40 weeks per year that he works for Jane.

Who does all of the “making” or “creating” ?

I appreciate your willingness to think of creative solutions, but be sensitive to your client.

KIS

Contribution Income Statement

Revenue	# units	X	sales price per unit
less variable costs	# units	X	Variable cost per unit
Contribution	# units	X	Contribution per unit	=	Total contribution
Fixed Costs	less total fixed costs
Income before tax	Income before tax.
Tax	Income X tax rate
Income after tax	Income after tax (belongs to the owner)

Your job is to determine which costs are fixed and which are variable per batch. Then find the target profit and determine the revenue required to reach target profit.

What is your recommendation?

Jane’s marketing and purchasing trips

Jane spends 10 weeks a year touring the U.S. and attending trade shows in order to sell her jewelry, and to find suppliers of semi-precious stones, beads, and other components for her products. Her travel, hotel and food costs were $6,050 each year. Workshop rent and utilities cost her an average of $300 per week. Jane works 40 weeks a year at making jewelry, and sublets the workshop for its cost in rent and utilities during her 10-week tour plus her 2 weeks of vacation each year.

Are marketing and purchasing important functions? Are they important to Jane and to her sales?

Rent and utilities of $300 per week (included in the rent, utilities, and raw materials numbers given later in the case).

KIS and read the entire case more than once carefully! Keep in mind your client’s needs.

Fixed and Variable manufacturing costs

The cost of rent, utilities and raw materials varied from $2,300 per week when 4 batches were produced, to $2,800 per week in weeks when 5 batches were produced, and $3,300 per week when 6 batches per week were manufactured.

$300 per week (not per batch, not per month) for rent and utilities. Be sure to read carefully!

Then WHAT IS THE COST per Batch for raw materials? Do not forgot to include the raw materials (those semi-precious stones, beads, etc. to make the jewelry) in the variable costs.

Oh, and KIS (Keep it simple)!