Precision Worldwide Case: What are the decision problem and the goal of the decision? Which is more
Fantastic news! We've Found the answer you've been seeking!
Question:
Precision Worldwide Case:
- What are the decision problem and the goal of the decision?
- Which is more profitable, steel or plastic rings?
- From your initial reading of the case, what would you do?
- What actions should Hans Thorborg take? Why?
Transcribed Image Text:
In late May 2004, Hans Thorborg, the general manager of the German plant of Precision Worldwide, Inc. (PWI), scheduled an afternoon meeting with his sales manager, accountant, and development engineer to discuss the introduction by the French firm Henri Poulenc (a competitor) of a plastic ring substitute for the steel retaining rings presently used in certain machines sold by Precision Worldwide. The plastic ring, new to the market, not only had a much longer life than the PWI steel ring but also apparently had a much lower manufacturing cost. Thorborg's problem stemmed from PWI's large quantity of steel rings on hand and the substantial inventory of special steel that had been purchased for their manufacture. After a thorough survey, he had found that the special steel could not be sold, even for scrap; the total book value of these inventories exceeded $390,000. For nearly 90 years PWI had manufactured industrial machines and equipment for sale in numerous countries. The particular machines involved in Thorborg's dilemma were made only at the company's plant in Frankfurt, Germany, which employed more than one thousand people. The different models were priced between $18,900 and $28,900 and were sold by a separate sales organization. Repair and replacement parts, which accounted for a substantial part of the company's business, were sold separately. As with the steel rings, these parts could often also be used on similar machines manufactured by competitors. The company's head office was in Toledo, Ohio, U.S.A. In general, plants outside the United States were allowed considerable leeway in administering their own affairs; the corporate headquarters, however, was easily accessible by telephone, email, or during executive visits to the individual plants. In the late 1990s, competition had increased. Japanese manufacturers, with low-priced spare parts, had successfully entered the field. Other companies had appeared with lower-quality and lower-priced machines. There was little doubt that future competition would be more intense. The steel ring manufactured by PWI had a normal life of about two months, depending upon the extent to which the machine was used. A worn-out ring could be replaced in a few seconds, and although different models of the machines required from two to six rings, the rings were usually replaced individually as they wore out. In late May 2004, Hans Thorborg, the general manager of the German plant of Precision Worldwide, Inc. (PWI), scheduled an afternoon meeting with his sales manager, accountant, and development engineer to discuss the introduction by the French firm Henri Poulenc (a competitor) of a plastic ring substitute for the steel retaining rings presently used in certain machines sold by Precision Worldwide. The plastic ring, new to the market, not only had a much longer life than the PWI steel ring but also apparently had a much lower manufacturing cost. Thorborg's problem stemmed from PWI's large quantity of steel rings on hand and the substantial inventory of special steel that had been purchased for their manufacture. After a thorough survey, he had found that the special steel could not be sold, even for scrap; the total book value of these inventories exceeded $390,000. For nearly 90 years PWI had manufactured industrial machines and equipment for sale in numerous countries. The particular machines involved in Thorborg's dilemma were made only at the company's plant in Frankfurt, Germany, which employed more than one thousand people. The different models were priced between $18,900 and $28,900 and were sold by a separate sales organization. Repair and replacement parts, which accounted for a substantial part of the company's business, were sold separately. As with the steel rings, these parts could often also be used on similar machines manufactured by competitors. The company's head office was in Toledo, Ohio, U.S.A. In general, plants outside the United States were allowed considerable leeway in administering their own affairs; the corporate headquarters, however, was easily accessible by telephone, email, or during executive visits to the individual plants. In the late 1990s, competition had increased. Japanese manufacturers, with low-priced spare parts, had successfully entered the field. Other companies had appeared with lower-quality and lower-priced machines. There was little doubt that future competition would be more intense. The steel ring manufactured by PWI had a normal life of about two months, depending upon the extent to which the machine was used. A worn-out ring could be replaced in a few seconds, and although different models of the machines required from two to six rings, the rings were usually replaced individually as they wore out.
Expert Answer:
Answer rating: 100% (QA)
Current Situation Precision Worldwide Incs PWI business model is manufacturing industrial machines and equipment worldwide In addition to manufacturing industrial machines and equipment PWI generates ... View the full answer
Related Book For
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
Posted Date:
Students also viewed these finance questions
-
A research firm tracks the average highway speed of 30 drivers driving home on Day 1. For the next 10 days, the drivers are given two cups of coffee 1 hour before the drive home. On the 10th day, the...
-
From the standpoint of a lender, which is more attractive: a high times interest earned ratio or a low times interest earned ratio? Explain.
-
From the standpoint of a lender, which is more attractive: a high times interest earned ratio or a low times interest earned ratio? Explain. Discuss.
-
Jim Redman purchased a car from Bill Branch Chevrolet. However, the car had been reported stolen and Jim was unable to secure a good title. Redman sued Bill Branch Chevrolet on the breach of the...
-
A little boy jumps onto a small merry-go-round (radius of 2.00 m) in a park and rotates for 2.30 s through an arc length distance of 2.55 m before coming to rest. If he landed (and stayed) at a...
-
Reconsider Prob. 1442. Determine the required properties using EES (or other) software instead of the psychrometric chart. What would the property values be at a location at 2000 m altitude?
-
Lynch Brothers manufactures conveyor belts. Early in January 2011, Lynch Brothers constructed its own building at a materials, labor, and overhead cost of $900,000. Lynch Brothers also paid for...
-
For the current year ending August 31, Bannack Industries expects fixed costs of $988,800, a unit variable cost of $412, and a unit selling price of $515. a. Compute the anticipated break-even sales...
-
MidTech is a multinational U.S.A. company that performs diverse activities. It manufactures electronic tools like hand-held digital electronic veniers, digital multimeters, voltage testers etc. To...
-
Which series has the highest beta. BraveNewCoin Liquid Index for Bitcoin 1D BNC Trading Brave Ne Yellow Green Blue Orange
-
Isadore's implements, Inc., manufactures pens and mechanical ponds often used fee gifts. Overhead costs are currently costs are currently allocated using direct labor-hours, but the controller has...
-
Pharmaceuticals - Revenue Breakdown 10- 10- P/o- %/0 25% 25% %+ 40% -34%- 12.5% Salaries Advertising 2002 10% 10% -8.5%- Training Overheads 2003 20% 15% Profit What are two items accounted for larger...
-
Smith Office Equipment Company's budgeted manufacturing overhead is $4,200,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 40,000....
-
In a recent year, the following statistics for electrical energy generation in a certain country were reported. If three homes from this country are picked at random, find the probability that all...
-
7. Consider the basic syntax of UPDATE statement as given below. How can we ensure with this syntax that at most one record is updated? [1 mark] UPDATE some Table SET someColumn = someValue WHERE...
-
An oil well cost $2.090.000 and is calculated to hold 350,000 barrels of of There is no residual value What journal entry is needed to record the expense for the extraction of 56.000 barrels of oil...
-
On January 1, the company granted 150,000 stock options to key employees. Each option allows an employee to buy one share of $1 par common stock for $25, which was the market price of the shares on...
-
We all experience emotions, but some people disguise their true feelings better than others. Do you think this is a helpful or harmful thing to do? Under what conditions do you think it would be most...
-
Lovell Company reported the following information related to its long-term assets: Property, plant, and equipment, beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . $230,000...
-
Watersports, Inc., sells high-performance water skis. Because its sales are seasonal, Watersports calculates and uses different reorder points for summer and winter months. The following information...
-
Brockbank Corporation was organized on July 15, 2012. Record the journal entries for Brockbank to account for the following: a. The state authorized 30,000 shares of 7% preferred stock ($20 par) and...
-
The standard enthalpy change of combustion of acetylene is \(-1300.48 \mathrm{~kJ}\) at \(298 \mathrm{~K}\) with \(\mathrm{H}_{2} \mathrm{O}\) in the liquid state. Calculate the standard enthalpy of...
-
Which instrument is used to determine the heat of combustion of a fuel?
-
A piston-cylinder device contains \(1.2 \mathrm{~kg}\) of saturated water vapour at \(180^{\circ} \mathrm{C}\). Heat is transferred to steam. As a result, steam expands reversibly to a final pressure...
Study smarter with the SolutionInn App