Giberson Glass Studio Assignment

Giberson Glass Studio Assignment Words: 789

Giberson’s Glass Studio was founded to produce exquisite handmade glass by Edward Giberson in 2002 and The main problems facing the company are the production schedule and usage of the principle skill set, namely Mr. Giberson.

While the business currently operates at a profit, it is not able to provide the $25,000 minimum in wages that is needed. By changing the production schedule, product mix and using more casual labour, the business can become much more profitable and provide a buffer to allow a day away from the studio. This would also allow the Furnace and Ovens to be shut off for 1 day a week creating a reduction in gas expense and increasing the life expectancy of these critical facilities. Another important concern is the condition of the Furnace and Ovens which are only expected to last another 6 months.

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At the end of this time we need to have budgeted enough to replace them. You will see in the cash flow table, I have shown how you can do this. Production Schedule The current production schedule (figure 1) creates 30 hours of blowing time per week with no allowance for the proprietor to have a break. This may not be necessary as you love your time in the studio, but it is prudent to build in a buffer should you wish to take time for yourself. The main focus of this schedule is to use your skills where they make the most profit and to use cheaper, casual labour where possible.

This could include lighting the glory hole, warming the ovens, cold production time and shipping . |Sunday |Monday |Tuesday |Wednesday |Thursday |Friday |Saturday | |Melting |Fining |2 hr Glory |2 hr Glory |2 hr Glory |2 hr Glory |2 hr Glory | | | |6 hr blowing |6 hr blowing |6 hr blowing |6 hr blowing |6 hr blowing |

Table 1 – Current Weekly Production Schedule Total blowing time = 30 hours I would recommend that you get a casual who can turn the ovens on in the morning before you arrive. This will allow you to spend more time blowing and producing more product. As you will see below, it is possible to achieve the same production time in 4 days blowing allowing you to turn off the ovens for 1 day a week. Turning the ovens off for 1 day a week will save approximately $140 per month in gas and increase their life expectancy from 2 years to 2. years. Over the life of the Ovens and Furnaces that is a saving of $3,600. |Sunday |Monday |Tuesday |Wednesday |Thursday |Friday |Saturday | |OFF |Melting |Fining |8 hr blowing |8 hr blowing |8 hr blowing |8 hr blowing | Table 2 – Proposed Weekly Production Schedule Total blowing time = 32 hours Based on my observations, you currently spend 20% of your time doing cold work.

Putting a dollar value you on your time based on the production of vases, gives $100/hour. If you passed the cold work to a casual then without increasing production time, you would be able to spend at least another 5 hours per week producing products and with labour costs of $5/hour, this would add another $475 (5*$95) to the bottom line per week. Depending on the product mix, this would also reduce the amount of scrap at the end of the week by increasing the yield from each batch.

Based on the current production schedule, using a casual to bring the ovens up to temperature, light the glory hole and do all the cold work would involve no more than 5 hours per day from Wednesday to Saturday and cost $100 per week. If they worked from 6 till 11 then the ovens would be up to temperature and ready for you to start when you arrived at 8 am, further reducing down time. Casual duty list – Light glory hole each morning (10 hrs), Cold work (7 hrs), Packaging and Shipping (5 hrs), Tidying and Miscellaneous (2 hrs)

Product Mix The other important change to bring the company into profitability is to change the product ratios and focus on the more financially rewarding items. By observing your work over the last 6 weeks, I can show that the majority of Hot Time is spent on Wrapped Tumblers and Patterned Glass. These products actual have the lowest sale price and therefore the lowest return on both time and materials. Product |Glass Content |Hot Time |Cold Time | |Revenue | 3,341 |3,560 |6,832 | |Cost of Materials | 180 |180 |180 | |Gas | 1,000 |860 |860 | |Operating Costs | 915 |1,045 |1,045 | |Depreciation | 385 |358 |358 | |Net Profit | 861 |1,117 | 4,389 | Table 7 – Monthly Cash Flow To see what effect this has over 12 months, I have multiplied the figures for Revenue, Cost of Materials, Gas and Operating costs by 9, representing the months where you are manufacturing. I have used 12 months for Depreciation and added in the 3 months of Non Production Operating Costs. A |Current |Production Schedule |Product Schedule & Product | | | | |Mix | |Revenue |30,069 |32,040 |61,488 | |Cost of Materials |1,620 |1,620 |1,620 | |Gas |9,000 |7,740 |7,740 | |Operating Costs |8,235 |9,405 |9,405 | |Depreciation |4,620 |3,222 |3,222 | |Non Production Operating |1,920 |1,920 |1,920 | |Costs | | | | |Net Profit |4,674 |8,133 |37,581 | Table 8 – Yearly Cash Flow Budgeting and Finance Income Statement Balance Sheet

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