Case Analysis

Read the

FinePrint case

(PDF File)

Download the

FinePrint Case Analysis

(Word File)

Download the

FinePrint Template

(Excel File)

Follow instructions in the Word document to complete the case analysis.

All documents listed above are attached below! Please use attached files ONLY!

Instructions are given on the Word document.

FINEPRINT COMPANY
John Johnson reflected on both offers he had received in the past couple of days.
First, Abbie Jenkins, a friend of Johnson’s and the owner of a small company in nearby
Keswick, Virginia, had called to see if Johnson’s printing company, FinePrint Company,
could accommodate a special printing order next month. In addition, Ernest Bradley, the
owner of a local one-room printing operation in Charlottesville, Virginia, called
SmallPrint Shop, had stopped by to see if FinePrint Company could use some help
printing color brochures over the next few months.
COMPANY BACKGROUND
Johnson’s company, FinePrint Company, printed elaborate high-quality color
brochures in its facility located in Charlottesville, Virginia. It primarily served other
businesses in the central Virginia area, although it did have some clients in southwest
Virginia and as far east as the Chesapeake Bay region of the state. Monthly production at
its Charlottesville facility was running at around full capacity of 150,000 brochures per
month. John Johnson owned and managed the company. He employed one sales
representative and one printing press operator, although he frequently relied on temporary
labor to help in the printing process as needed to accommodate any changes in printing
volume. John felt that many of his costs were fixed, but that some costs varied with the
number of brochures he printed and sold. Exhibit 1 contains information related to
FinePrint’s monthly operating costs for the company’s current activity level of 150,000
brochures per month.
The company typically priced its printing services at an average of $17 per I 00
brochures printed. Historically, Johnson had encountered little variation in pricing from
job to job, although occasionally, special situations did arise. He wondered how he
should handle those special situations. He didn’t have a “rule of thumb” he could apply,
but he wished he could find one.
2
PART I: UNDERSTANDING COSTS AND COST BEHAVIORS
Document1, page – 1 –
FinePrint Case Analysis
Student Name: _______________________________________________________________
Read the FinePrint case PDF and complete each of the requirements by inserting text-based responses
below each question. Use the FinePrint Excel Template to answer question 1 and question 4.
Required:
1. EXCEL: In the FinePrint Excel Template provided, complete the highlighted cells in column B
to represent cost per unit (where one unit is 100 brochures). Use Excel formulas and feed data from
cells, as appropriate. Do not type amounts manually – formulas are required to earn credit.
2. Explain the difference between manufacturing costs and nonmanufacturing costs and provide
examples for each.
3. Explain fixed and variable cost behavior in terms of production volume, by responding to the items
below.
a) Enter Yes or No into the table below to respond to each of the following questions:
Does variable cost per-unit change when production volume changes?
Does total variable cost change when production volume changes?
Does fixed cost per-unit change when production volume changes?
Do total fixed costs change when production volume changes?
Per-Unit Costs
Total Costs
Variable Costs
Fixed Costs
b) Provide an example of a fixed cost and an example of a variable cost.
4. EXCEL: Assume that current monthly production at FinePrint is 120,000 brochures rather than
150,000 brochures. Use the information you computed in question 1 to prepare a cost analysis for
the new level of production. Complete the highlighted cells in columns E and F in the worksheet
to compute/present your answer. Use Excel formulas and feed data from cells, as appropriate. Do
not type amounts manually – formulas are required to earn credit.
Document1, page – 2 –
5. Review your Excel cost analyses and explain why some manufacturing and nonmanufacturing costs
differ depending on the volume of brochures produced and why some stay the same. Be sure to
address both per-unit and total costs in your response.
6. Provide a brief reflection on what you learned about cost behavior from completing this case and
how these concepts can be used to support decision-making in an organization. Include at least two
specific examples in your response.
The monthly costs shown below are from Exhibit 1 in the case, assuming printing volume is 150,000 brochures.
Your assignment is to compute the amounts in the highlighted cells.
Number of units:
Volume (# of brochures)
# brochures in each unit
# of units
150.000
120.000
Cost per 100 Monthly costs at
brochures
150,000 volume
Manufacturing costs:
Direct material, variable
Direct labor, variable
Direct labor, fixed
Manufacturing overhead, variable
Manufacturing overhead, fixed
Total manufacturing costs
$6.000
1.500
3.000
1.500
3.375
$15.375
Nonmanufacturing costs:
Marketing, variable
Marketing, fixed
Corporate, fixed
Total nonmanufacturing costs
Total costs
$1.500
1.875
3.750
$7.125
$22.500
Cost per 100 Monthly costs at
brochures
120,000 volume
Variable manufacturing costs per unit
Variable nonmanufacturing costs per unit
Fixed manufacturing costs per unit
Fixed nonmanufacturing costs per unit
7d90199f56a5bc85d0d87cfc13142655 Exhibit 1