Superior Manufacturing Company Case 1

EMBA Spring 2015
Superior Manufacturing Company Managerial Accounting

DR.: Khalid Hegazy

Assignment Presented by: Mona Abdallah
Student ID : 131239

Superior Manufacturing Company
Question1:
Do You Agree with Water’s decision to keep product 103?
As per below calculations, dropping Product 103 will result in more loss while they were making a profit in case of keeping all of the 3 products. Based on this, I agree with Waters’s decision to keep product 103.

Product 101
Product 102 Product 103
(in thousands)

per 100 lbs. per 100 lbs. per 100 lbs.
Total
In case of dropping product 103
Rent
$1,872
$0.88
$1,570
$1.53
$1,882
$1.90
$5,324
$5,324
Property Taxes
621
0.29
503
0.49
401
0.40
1,525
1,525
Property Insurance
524
0.25
405
0.39
534
0.53
1,463
1,463
Compensation Insurance
836
0.39
439
0.42
458
0.46
1,733
1,275
Direct Labor
12,937
6.06
6,107
5.92
6,879
6.97
25,921
19,042
Indirect Labor
4,413
2.07
2,124
2.06
2,309
2.33
8,846
8,846
Power
220
0.11
251
0.24
302
0.31
773
471
Light & Heat
158
0.07
130
0.12
106
0.10
394
394
Building Service
109
0.05
82
0.08
75
0.08
266
266
Materials
7,641
3.59
4,716
4.58
4,851
4.91
17,208
12,357
Supplies
525
0.25
485
0.46
350
0.36
1,360
1,010
Repairs
184
0.08
150
0.15
104
0.10
438
334
Total
$30,040
$14.09
$16,962
$16.44
$18,249
$18.45
$65,251
$52,307

Selling Expense
9,100
4.27
4,582
4.44
4,701
4.76
18,383
13,682
General Administrative
3,451
1.62
1,300
1.26
1,783
1.80
6,534
6,534
Depreciation
5,659
2.65
4,274
4.16
3,658
3.70
13,591
13,591
Interest
524
0.25
409
0.39
539
0.53
1,472
1,472
Total Cost
$48,774
$22.88
$27,527
$26.69
$28,930
$29.24
$105,231
$87,586

Less: Other Income
101
0.04
53
0.05
51
0.05
205
154

$48,673
$22.84
$27,474
$26.64
$28,879
$29.19
$105,026
$87,432

Sales (Net)
51,672
24.24
25,996
25.23
26,670
27.03
104,338
77,668
Profit