Sample Management Essay Paper

Question 1.4

One the average, a company has a work in process lead time of 12 weeks and annual cost of goods sold of $40 million. Assuming that the company works 50 weeks a year:

  1. What is the dollar value of the work in process?

Cost of goods sold per week = 40, 000, 000/50 = $800,000

Average value of 10 weeks work in process = 10*$800,000*1/2=$4,000,000

  • If the work in process could be reduced to 5 weeks and the annual cost of carrying inventory was 20% of the inventory value, what would be the annual saving?

Average of 5 weeks work in process = 5 x $800,000×1/2=$2,000,000

Reduction in work process $4,000,000 – $2,000,000=$2,000,000

Annual saving =20% x $2,000,000 =$400,000.

Question 1.5

Amalgamated fenderdenter’s sales are $10 million. The company spends $3.5 million for purchase of direct materials and 2.5 million for direct labor, overhead is $3.5 million and profits are $500,000. Direct labor and direct material vary directly with the sales but overhead does not. The company wants to double its profits.

  1. By how much should the company increase its sales

Sales                        $10,000,000         $16,500,000

Direct material         $3,500,000          $7,000,000

Direct labor              $2,500,000           $5,000,000

Overheads                 $3,500,000         $3,500,000

Profits                        $500,000            $1,000,000

Sales should increase by $6.5 million

Material costs by $3.5 million

Labor cost by $2.5 million