Giberson’s Glass Studio
Felicia Coates
University of Virginia
Darden Graduate Business School
September 15, 2008
Edward Giberson
Giberson’s Glass Studio
Owner
Dear Mr. Giberson:
I appreciate an opportunity you provided for me to observe and analyze a production process at your studio. I would like to share with you my observations and recommendations.
There are four products you produce at the studio: Patterned glasses, Paperweights, Wrapped tumblers and Vases. Based on amount of a batch mix and average number of units produced, I calculated Direct Materials per Unit as following:
Item Direct Materials Cost per Unit, $ Patterned glasses 0.29
Paperweights 0.52
Wrapped tumblers 0.29
Vases 0.35
I also measured an amount of time you spend on blowing and finishing of the goods. In order to calculate Direct Labor cost per unit, I used hourly rate of $25.00
Direct labor costs are represented below:
Item Production Time, Hr. Total Direct Labor per Unit Time, Hr. Total Direct Labor per Unit Cost, $. Hot Time, Hr. Cold Time, Hr. Patterned glasses 0.25 0.05 0.30 7.50
Paperweights 0.25 0.25 0.50 12.50
Wrapped tumblers 0.25 0.05 0.30 7.50
Vases 0.42 0.08 0.50 12.50
In addition to the direct variable costs, I also detected multiple operating costs. I would underline among others, the following:
Furnace Gas $1,000.00
Insurance 90.00
Rent 175.00
Total Fixed $1,265.00
These costs are fixed. They do not depend on a production level. Even if you do not produce any number of goods, the fixed costs will stay the same.
There are also a number of variable operating costs estimated as following:
Office supplies $25.00
Hand tools and manufacturing supplies 150.00
Part-time labor 100.00
Professional services 50.00
Advertising & promotion 20.00
Contributions 15.00
Dues & subscriptions 35.00
Travel & entertainment 75.00
Taxes & licenses 45.00
Repairs & maintenance 25.00
Utilities & telephone 60.00
Miscellaneous 50.00
University of Virginia
Darden Graduate Business School
September 15, 2008
Edward Giberson
Giberson’s Glass Studio
Owner
Dear Mr. Giberson:
I appreciate an opportunity you provided for me to observe and analyze a production process at your studio. I would like to share with you my observations and recommendations.
There are four products you produce at the studio: Patterned glasses, Paperweights, Wrapped tumblers and Vases. Based on amount of a batch mix and average number of units produced, I calculated Direct Materials per Unit as following:
Item Direct Materials Cost per Unit, $ Patterned glasses 0.29
Paperweights 0.52
Wrapped tumblers 0.29
Vases 0.35
I also measured an amount of time you spend on blowing and finishing of the goods. In order to calculate Direct Labor cost per unit, I used hourly rate of $25.00
Direct labor costs are represented below:
Item Production Time, Hr. Total Direct Labor per Unit Time, Hr. Total Direct Labor per Unit Cost, $. Hot Time, Hr. Cold Time, Hr. Patterned glasses 0.25 0.05 0.30 7.50
Paperweights 0.25 0.25 0.50 12.50
Wrapped tumblers 0.25 0.05 0.30 7.50
Vases 0.42 0.08 0.50 12.50
In addition to the direct variable costs, I also detected multiple operating costs. I would underline among others, the following:
Furnace Gas $1,000.00
Insurance 90.00
Rent 175.00
Total Fixed $1,265.00
These costs are fixed. They do not depend on a production level. Even if you do not produce any number of goods, the fixed costs will stay the same.
There are also a number of variable operating costs estimated as following:
Office supplies $25.00
Hand tools and manufacturing supplies 150.00
Part-time labor 100.00
Professional services 50.00
Advertising & promotion 20.00
Contributions 15.00
Dues & subscriptions 35.00
Travel & entertainment 75.00
Taxes & licenses 45.00
Repairs & maintenance 25.00
Utilities & telephone 60.00
Miscellaneous 50.00