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Wriston Manufacturing Wriston Manufacturing Wriston Manufacturing We identified seven factors contributing to the variance in overhead costs from plant to plant. However, in order to best understand how these factors contribute to inter-plant variance, it is helpful to first take note of the individual components of total overhead.
It is also noteworthy that several of the factors identified below are material with respect to our analysis regarding how Richard Sullivan should proceed with the Detroit plant. In terms of fixed overhead costs, the factors most relevant to inter-plant overhead variance are a differing depreciation schedules between plants, and b significant differences in the amenities offered within plants to employees.
Additionally, the amount of amenities offered within plants varies significantlycompounding the issues caused by varying levels of investment.
Thus, the costs of production, in terms of i inputs necessary and ii amount of output produced, varies between plants, contributing to variance in cost between plants. Additionally, unlike some of the other plants, Detroit has organized its machinery to resemble more of a batch production system as compared to the line production found in other plants and this decision ultimately impacts output and cost of production.
Finally, the process of transferring products and employees between plants creates distortions in the allocation of costs between plants and, as a result, would contribute to inter-plant overhead variance. The case discusses three major alternatives open to Richard Sullivan.
The cash flows and costs involved for these alternatives, from the feasibility study, along with their Net Present Values NPV are presented below. From the above analysis, the alternative to close the current Detroit plant, transfer the production of on-highway axles to Lancaster and off-highway axles to Saginaw, and dropping the remainder of the products returns the highest NPV.
However there are some major drawbacks to this option. Since all the other plants use manufacturing processes that cater to high-volume and standardized products, any move to transfer low volume products would have a negative impact on the production efficiency of others and lead to an increase in burden rates.
The variation in product types as well as their low volumes suggests the need for a flexible system to handle the manufacturing process. Although the 3rd group of products are not economically feasible to manufacture, Wriston risks losing its customer base by stopping its production.
Moreover, the company has a responsibility towards its employees and any move to terminate the whole workforce can have negative repercussions on other employees.
The investing activities does not have any impact on its current profitability levels and therefore this option is not recommended. However, since closing the plant and moving production has serious drawbacks, this option has to be taken into consideration.
As the Detroit plant can run at a breakeven for another 5 years, the recommended approach would be to continue Detroit operations with a 4 hour workweek and at the same time invest in a ew low volume plant. The new plant should be designed to have a more flexible manufacturing process to handle production of prototypes and low volume parts, and accommodate all three product lines, so as to maintain existing customer relationships.
This approach will ensure that the employees at the Detroit plant slowly transition into their new jobs, at the same time giving the company an opportunity to bring about a change in work habits. Yet another important change would be in terms of the cost accounting practices.
As the Detroit plant bears the overheads for the development of prototypes and new products, it is essentially in a way contributing to the bottom-line of the company and that of the other plants. Therefore a portion of the profits of the other plants should be attributed to the one at Detroit.
To conclude, since the needs of the customers and employees assume higher priority, the best alternative for Richard Sullivan is to continue with the Detroit operations for the next three or four years, while investing in a new plant, with a flexible manufacturing process capable of handling three different product lines.
The employees from the Detroit plant can be given a choice to retire voluntarily or transition into jobs at the new plant, while bringing about an increase in worker productivity. Lastly, a change in accounting practices will ensure that the actual contributions of the Detroit plant to overall profitability of the division is recognized.Bridgeton Industries Automotive Component and Fabrication Case Study This 19 page paper looks at a case study supplied by the student, Bridgeton Industries Automotive Component and Fabrication.
The first part of the paper lo. Case Solutions of Bridgeton Industries: Automotive Component & Fabrication Plant_Robin Cooper, Patricia J.
Bost_PDF-ENG. Bridgeton Industries: Automotive Component & Fabrication Plant The Automotive Component and Fabrication Plant (ACF) was the original plant site for Bridgeton Industries, a major supplier of components for the domestic automotive iridis-photo-restoration.com manufactured fuel tanks, manifolds, doors, muffler/exhausts and oil pans.
. In Bridgeton Industries produced three products at its Automotive Component & Fabrication (ACF) Plant: Fuel Tanks, Manifolds, and Doors. Use the information below to respond to the following: iridis-photo-restoration.comte the pro-forma by-product income statement, given the existing cost system in the case.
This cycle put the firm in a very precarious position (death spiral) Organizational Structure: Bridgeton industries – three components: diesel engine plant, other companies, and the ACF (Automotive Component and Fabrication plant) Within the ACF, there was a diesel engine plant and other production plants.
Nov 16, · The company's Precision Components and Tooling segment provides tooling design and fabrication, and die making services to the manufacturers of automotive components, and office automation and.