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Mendel Paper Company

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Mendel Paper Company
Mendel Paper Company Mendel Paper Company has been doing relatively well with the sales of computer paper, napkins, place mats, and poster board. With more people eating out, the demand for napkins and place mats have increased. Computer paper and poster boards have slowly increased in demand as well. However, there is concern at the company with the fixed cost of operations. Marlene Herbert, the plant superintendent, said, “As we have automated our operation, we have experienced increases in fixed overhead and even variable overhead. And, we will have to add more equipment since it appears that we need even more plant capacity. We are operating over our normal capacity as it is.” (Case 2B). With the new production costs added in, will the Mendel Paper Company have what it takes to succeed? For computer paper for the next fiscal quarter, according to the information given by the superintendent, Mendel Paper Company will receive a profit of $240,000.00. If 30,000 units are produced and sold at $14.00 then the total sales will be $420,000.00. However it costs the company $6.00 to produce each unit. So, 30,000 units at $6.00 a unit costs the company $180,000.00. The total sales cost of $420,000.00 minus the cost of labor of $180,000.00 equals the profit of $240,000.00. News came in however from the vice-president of purchasing that the company has firm orders for 35,000 cartons of computer paper. So, if the company continues to sell each unit of computer paper at $14.00 then the total cost of sales is $490,000.00. It still costs Mendel Paper Company $7.00 to produce each unit, therefore costing the company $245,000.00. Making the total profit of computer paper $245,000.00. The same formula can be applied to the napkins that Mendel Paper Company produces. The company is expected to sell 120,000 units of napkins for the next fiscal quarter. They sell the napkins at $7.00. If they sell 120,000 napkins at $7.00 then they will make $840,000.00. However, you have to


References: Case 2B – Mendel Paper Company. (N.D.). Retrived from website http://vizedhtmlcontent.next.ecollege.com/pub/content/bc097e4c-08f0-4bd3-990d-b3a4f206ea47/Week_1_Assignment_CASE_2B.pdf Schneider, A. (2012). Managerial accounting: Decision making for the service and manufacturing sectors. San Diego, CA: Bridgepoint Education.
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