Hpmc Case Study
HARDING PLASTIC MOLDING COMPANY
On January 11, 1975, the finance committee of Harding Plastic Molding Company (HPMC) met to consider eight capital budgeting projects. Present at the meeting were Robert L. Harding, President and founder, Susan Jorgensen, comptroller, and Chris Woelk, head of research & development. Over the past five years this committee has met every month to consider and make final judgment on all proposed capital outlays brought up for review during the period.
Harding Plastic Molding Company was founded in 1954 by Robert L. Harding to produce plastic parts and molding for the Detroit automakers. For the first 10 years of operations, HPMC worked solely as a subcontractor for the automakers, but since then has made strong efforts to diversify in an attempt to avoid the cyclical problems faced by the auto industry. By 1970 this diversification attempt had led HPMC into the production of over 1000 different items, including kitchen utensils, camera housings, phonographic and recording equipment. It also led to an increase in sales of 500 percent during 1964 to 1974 prod. As this dramatic increase in sales was paralleled by a corresponding increase in production volume, HPMC was forced, in late 1973, to expand production facilities. This plant and equipment expansion involved capital expenditure of approximately Rs. 10.5 million and resulted in an increase of production capacity of about 40 percent. Because of this increased production capacity, HPMC has made a concerted effort to attract new business, and consequently, has recently entered into contracts with a large toy firm and a major discount department store chain. While non-automotive related business has grown significantly, it still only represents 32 percent of HPMC’s overall business. Thus, HPMC has continued to solicit non-automotive business, and as a result of this effort and its internal research and development, the firm has four sets of mutually exclusive projects to
On January 11, 1975, the finance committee of Harding Plastic Molding Company (HPMC) met to consider eight capital budgeting projects. Present at the meeting were Robert L. Harding, President and founder, Susan Jorgensen, comptroller, and Chris Woelk, head of research & development. Over the past five years this committee has met every month to consider and make final judgment on all proposed capital outlays brought up for review during the period.
Harding Plastic Molding Company was founded in 1954 by Robert L. Harding to produce plastic parts and molding for the Detroit automakers. For the first 10 years of operations, HPMC worked solely as a subcontractor for the automakers, but since then has made strong efforts to diversify in an attempt to avoid the cyclical problems faced by the auto industry. By 1970 this diversification attempt had led HPMC into the production of over 1000 different items, including kitchen utensils, camera housings, phonographic and recording equipment. It also led to an increase in sales of 500 percent during 1964 to 1974 prod. As this dramatic increase in sales was paralleled by a corresponding increase in production volume, HPMC was forced, in late 1973, to expand production facilities. This plant and equipment expansion involved capital expenditure of approximately Rs. 10.5 million and resulted in an increase of production capacity of about 40 percent. Because of this increased production capacity, HPMC has made a concerted effort to attract new business, and consequently, has recently entered into contracts with a large toy firm and a major discount department store chain. While non-automotive related business has grown significantly, it still only represents 32 percent of HPMC’s overall business. Thus, HPMC has continued to solicit non-automotive business, and as a result of this effort and its internal research and development, the firm has four sets of mutually exclusive projects to