Case Study #1; Precision Around the world, Inc.
Precision Around the world, Inc. (PWI) should end production with their steel rings, proceed to production of the new plastic-type rings, and scrap any kind of unused or unsold stainlesss steel inventories in conjunction with the availability of the modern plastic ring product. The earlier the company will be able to sell plastic-type rings, the earlier they will be in a position to realize the increased income associated with that product. The creation of the plastic-type ring in one of PWI's competitors adjustments the dynamic of the industry for this sort of product as any end users of those rings will certainly immediately view the merit of having that said jewelry in plastic-type instead of metallic. Any holds off in making the plastic bands available could jeopardize PWI's business relationship with buyers in the major assemblies that are also produced by PWI. The risk of shedding buyers of major devices is too great to justify prolonged product sales of the poor steel rings once the plastic-type product is offered. PWI should certainly make every effort to reduce waste when disposing of raw steel products on hand and finished goods. To facilitate this process, PWI might implement a 15% cost reduction about steel rings until the start of Sept. 2010 which will offer increased sales intended for 14 weeks. The company is not going to make use of 70 percent wages during this period period because the company are not producing further steel rings between May and Sept. 2010 2004. The projected loss to the company if leftover steel products on hand is liquidated and scrapped-out at $0. 00 is approximately $278, hundranittiotv?. 90 (see below). Total cost of Metallic Inventories| $390, 000. 00
Expense of Raw Steel| $110, 900. 00
Cost of Metal Finished Goods| $279, 010. 00
Inventory projected on-hand by Mid-September|
(=15, 75 rings/100*1, 107. 9)| $167, 292. 85
Total Discard forecast|
(=Raw Metal Cost & Mid-Sep products on hand projections)| $278, 192. 85 |...