global washer and dryer manufacturer

global washer and dryer manufacturer

Group Activity

For this activity, you have been hired as a team of consultants on a multi-year basis for

a global washer and dryer manufacturer. They currently offer two core washer and dryer

sets: a high-end model and an economic model. You are tasked to complete several

calculations and present your findings to the company stakeholders. You may use any

presentation software (Google Slides, Prezi, PowerPoint, etc.) and your completed

presentation should consist of 8 – 12 slides. A copy of the final presentation will be

submitted by each member of the group in Unit 7.

1. For your first assignment, management has provided the following revenue and cost

information:

High-End Set Economical Set

Sales price $3,500 per unit $1,000 per unit

Labor $875 per unit $250 per unit

Materials $1400 per unit $300 per unit

Direct fixed costs $25,000 per month $16,500 per month

Allocated fixed costs $85,000 per month $85,000 per month

They want a better understanding of their business to make budgeting and sales goals

decisions and have asked you to determine their:

1. Contribution Margins for each product line

2. Break-even quantities for each product line

3. Break-even quantities to earn $500,000 per year margin on the

high-end line (at the current sales price)

4. Break-even quantities to earn $300,000 per year margin on the

economical line (at the current sales price)

They expect the product lines to fully absorb the costs allocated to them. They have

also asked that you show each step in your calculations so that they can understand

your analysis. (Note: you will be graded on your intermediary values.)

Once you have determined these amounts, they have asked that you:

• present the information

• describe how you performed your calculations

• and explain what the results mean

2. Later, the company is considering the purchase of machinery and equipment to set

up a line to produce a combination washer-dryer. They have given you the following

information to analyze the project on a 5-year timeline:

• Initial cash outlay is $150,000, no residual value.

• Sales price is expected to be $2,250 per unit, with $595 per unit in labor

expense and $795 per unit in materials.

• Direct fixed costs are estimated to run $20,750 per month.

• Cost of capital is 8%, and the required rate of return is 10%.

• They will incur all operational costs in Year 1, though sales are expected to

be 55% of break-even.

• Break-even (considering only direct fixed costs) is expected to occur in Year

2.

• Variable costs will increase 2% each year, starting in Year 3.

• Sales are estimated to grow by 10%, 15%, and 20% for years 3 - 5.

They have asked you to calculate:

• The product’s contribution margin

• Break-even quantity

• NPV

• IRR

Once you have determined these amounts, they have asked that you present the

information, describe how you performed your calculations, and explain what the results

mean.

After you have completed the calculations and presented your work, management

makes the investment.

• Explain how the project analyses do or do not support this decision.

• In either case, what are the factors that should have been considered in

management’s decision?

3. After the combo washer-dryer has been in production for a few years, you are asked

to perform another analysis. You must evaluate the performance of all three product

lines as management is concerned with the viability of the washer-dryer combination

product. They provide you with the latest annual information by product:

High-End Set Economical Set W/D Combo Total

Sales $4,700,000 $4,060,000 $880,000 $9,640,000

Labor $(1,250,000) $(1,015,000) $(235,000) $(2,500,000)

Materials $(1,885,000) $(1,220,000) $(315,000) $(3,420,000)

Direct fixed costs $(325,000) $(220,000) $(250,000) $(795,000)

Allocated fixed costs $(650,000) $(650,000) $(650,000) $(1,950,000)

Net Income $590,000 $955,000 $(570,000) $975,000

You are asked to perform an analysis to determine whether to drop or keep the washerdryer combination product and present your findings, including the steps taken to make 

your determination. You are also asked to evaluate if the costing methodology is

appropriate and, if not, recommend alternative methods.

Please describe the circumstances of the case study and make the required

recommendations. Explain your approaches to the problems, perform relevant

calculations and analyses, and justify your recommendations. Evaluate the results and

explain what each calculated value means. Ensure your work and conclusions are

thoroughly supported.

Superior presentations will:

• Describe the circumstances.

• Perform all calculations correctly.

• Articulate how the calculations were performed.

• Evaluate the computations and explain their meanings.

• Make recommendations, supported by well-thought-out rationale and

considering various factors that could impact the recommendations.

You have been provided with two areas in the course to discuss and collaborate: A

group discussion forum and a wiki collaboration area. Group members and instructors

have access to these areas and can see the discussions and the work you do within

these areas. This communication is not graded. You are also free to use tools outside of

the course, such as Google Docs, Yammer, etc. if your group chooses to do so.

Your presentation is due in Unit 7. Be sure to use APA formatting in your presentation

and ensure it looks professional. As a reminder, the Purdue OWL website can be

accessed here: http://owl.english.purdue.edu/owl/resource/560/01/