Blanchards

Group #6

Blanchard Importing and Distribution Co., Inc. Case Study

1. Calculations for Setup cost (S):

Size Changeover Cost = (cost of resetting all machinery for change in bottle size / average number of different items of given size processed between size changeover)

= 23000 / (52*7*10)

=$6.3186 per changeover

Label Changeover Cost = Average length of time the bottling line was shut down to change from one label to another label of the same bottle size.

= (23000*0.5*8)/(52*7) + 5*2.50*0.5

= $10.20 per label changeover

Order Processing Cost = yearly cost of two office workers / total number of separate item-bottling runs per year.

= (18000)/350

= $51.43 per order

| Blending Setup Costs | Size Changeover Costs | Labor Changeover Costs | Order Processing Costs | Total Setup Cost (S) |

Blanchard’s 80p Vodka | $1.15 | $6.32 | $10.20 | $51.43 | $69.10 |

Blanchard’s 80p Gin | 1.08 | 6.32 | 10.20 | 51.43 | $69.03 |

MacCoy & MacCoy 86p Scotch | 3.24 | 6.32 | 10.20 | 51.43 | $71.19 |

Triple 7 86p Whiskey | 2.62 | 6.32 | 10.20 | 51.43 | $70.57 |

Blanchard’s 80p Ron Cores Rum | 2.33 | 6.32 | 10.20 | 51.43 | $70.28 |

Calculations for Carrying Costs (K):

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Calculations for Unit Cost (C):

Fixed overhead allocation = total company fixed overhead for the year / number of cases sold per year

We can then calculate the total fixed overhead using the given data for the year 1969 (we can use this because fixed overhead remains constant from year to year)

Total Fixed Overhead = 1.31 * (2455+1421+800+3096+449)

= $10769.51

For the year 1971 demand:

Fixed Overhead Allocation = $10769.51 / (2715+1387+1087+2887+355)

= $1.28

| Materials-Beverage | Materials- Packaging | Bottling Labor | Fixed Overhead Allocation | Variable Overhead | Customs Duty | Fed. Distilled Spirits Tax | Fed. Rectification Tax | Total Unit Cost (C) |...