Case Analysis on Tenalpina Tools – Case Study – Rob Miclat
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Case Analysis on Tenalpina Tools
[pic 1]DE LA SALLE UNIVERSITY – MANILAMASTER OF BUSINESS ADMINISTRATIONTenalplina Tools: An Entrepreneur’s DilemmaIn Partial Fulfilment of the Requirementsin Management Accounting (ACC535M)Submitted by:Andrhea ArnucoPatricia CoRob MiclatShienel MujarSubmitted to:Prof. Jose Lauro CruzCASE BACKGROUNDTenalpina Tools is a business owned and managed by Giulia Ferrate, a recent MBA graduate who took an internship at a retailing company that specialized in mountaineering equipment. She developed a high-quality, lightweight titanium piton, a tool used in mountain climbing. The production of the pitons was contracted in a company that can do drop forging – which is an integral part of the piton’s production process. Original trial order of piton was 1,000 units with a reorder rate of 1,000 unit per month. The retailer paid Giulia $11.00 per unit of piton plus its shipping cost. For a pack of 1,000 pitons, the forged charged her $9,000. After accounting the material waste and recovery, the cost of the titanium alloy bars was $1.45 per piton. Giulia sole customer has made an offer of significant guaranteed demand for a two-year period, with a purchase volume of at least 4,000 units per month at $10.50 per unit. Almost simultaneously, she is presented the opportunity to take over the forge operation of her contract manufacturer. She is trying to decide what would happen to her business under such a scenario.        STATEMENT OF THE PROBLEMGiven the opportunity of owning a forge operation and the idea of developing a new product, what will Giulia need to do expand her business in order to gain a higher profit?OBJECTIVESThis case aims to:To decide on whether to purchase a forging company or not, given all the cost associated for its operation.To identify possibilities of growth for Tenalpina Tool Company AREAS FOR CONSIDERATIONS AND ASSUMPTIONSGiulia’s trial order of piton is $1,000 unitsSelling price for piton $11.00 per unitExpenses in processing a pitonForge processing fee$9,000/1,000 unitsTitanium alloy bar$1.45/pitonGiulia’s customer offers a guaranteed purchase of 4,000 units per month at $10.50/unit for the length of 2 years.Stanley who is the contract manufacturer wants to sell his business to Giulia. Stanley is operating with a minimum crew of 6 workers.Giulia’s volume of 1,000 units consumed only 1 week of labor capacity per monthPurchase price for all business asset would be under $100,000Administration cost would average about $600/monthBelow is Stanley’s forge operating expense.Labor (6 workers)$345,000/yearLease cost for the building, maintenance and utility cost$33,000/yearDepreciation of Equipment $14,344/yearCost of Supplies$110/for every 1,000unitsElectricity$1,908/1,000units$1,962/1,300unitsCASE ANALYSIS PROPERThe figure shows Giulia’s profit for 1,000 units of piton processed in the forge.No. of units        1,000.00 Price/unit$11.00 Revenue$11,000.00 Manufacturing cost$9,000.00 Cost of titanium bar$1,450.00 Total Expense$10,450.00 Profit$550.00  If Giulia decide to buy the forge company and accept the offer of his customer, based on the data given the breakeven volume and sales is the following:No. of units4,000.00Price/unit$10.50Cost of piton/unit$1.45Cost of Supplies/unit$0.11Labor/unit$7.19Electricity/unit$1.70Variable Cost$10.45Depreciation$1,196.25Rent$2,750.00Admin$600.00Fixed Cost$4,546.25Total Fixed Cost$4,546.25Contribution Margin per Unit0.053Breakeven volume86,595Contribution %0.005Breakeven Dollars$    909,250.00
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By: Rob Miclat
Submitted: January 24, 2016
Essay Length: 926 Words / 4 Pages
Paper type: Case Study Views: 4,665
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