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Assignment II – Blue Ridge Manufacturing

INTRODUCTION:

Blue Ridge Manufacturing produces and sells sport towels in the USA market.

The firm knits all the towels it sells and tracks costs for towel production separately

from the cost to customize the towels. Seventy-five percent of its orders include logo

design, while the balance are print only and require the payment of a licensee fee for

the logo used.

Towels are made in four different sizes: Regular, hand, mid-range and hand.

The normal production cycle for an order of white towels is three days. If a customer

wants a colored towel, the basic white towel made by Blue Ridge is sent to a dyeing

firm for 3 days more. The company sells its products to 986 different customers,

which are divided into 3 types of groups: Large (8), medium (154), and small (824).

They use different approaches to serve different customers: Large Customers,

primarily national chains, are supported by a small in-house salespeople; Medium

Customers, which are small chains, large single store, licensing, sport teams, are

supported by independent representatives (on commissions); and Small Customers,

primarily single stores, attracted by Advertisements in magazines and newspapers,

who call or mail in their orders. Blue Ridge does not give discounts and ships all

orders FOB point of origin.

GENERAL ASSUMPTION:

1. We do not take into consideration the value of 85 units for other process as

stated in the table 2 since there is no sufficient information about the

proportion to separate it into 3 different customer sizes.

2. The same case is happened as well for table 3 where is stated the dollar value

of $17,000 for other factory overhead but there is no real relationship with

each customer size.

3. According to the information given in page 2, we only allocated the cost of

commission and licensees into the medium-sized customers (directly), while

the cost to make sale calls is allocated to large-sized customers....