Established in $2022,$ Flex Star provides premium packaging solu$$ons u$$lizing cu$$ng$-$edge

equipment, advanced processes, and rigorous quality control measures. Their ver$$cally integrated

manufacturing environment offers comprehensive engineering services, prepress and graphics

capabili$$es$,$ premium blown film produc$$on$,$ high$-$resolu$$on prin$$ng$,$ solventless lamina$$on$,$

precise sli$$ng$,$ and state$-$of$-$the$-$art conversion equipment. Alex Korosky is the CEO of Flex Star; he

convened a management mee$$ng to discuss the financial performance of Flex Star along with the

expansion plan that he has in mind. Alex led the mee$$ng with his execu$$ve team and ensured the

pressing important topics were discussed.

The sales manager started the mee$$ng with credit risk management. According to the sales

manager, Flex Star has an excellent credit$-$establishing process, a structured system for tracking

credit periods which need to be established. Each credit applica$$on process starts with the sales

manager reques$$ng a credit applica$$on to be filled out by the customer, which the sales manager

then approves for the credit limit request. The customer$$s applica$$on is then forwarded to the

accoun$$ng team so it can set up the customer's account. At first glance, Alex believes this to be a

good process but is wondering if improvements can be made and how progress might be measured

by the execu$$ve team.

Being a manufacturing plant, Flex Star is quite concerned about direct labour costs, as they make up

a major part of the cost of inventory. The recent union nego$$a$$on has caught Alex$$s aten$$on$,$ and

a$$er consul$$ng with the HR manager, he has come to the realiza$$on that direct labour rate for his

plant workers, along with the supervisor salaries, will soon be increased by $10\%.$ As many of the

firm$$s sales contracts will be coming due in two months $($with the rate increases kicking in at about

the same $$me$),$ it is important for the execu$$ve team to come up with a strategic plan to manage

this increase.

As the labour cost conversa$$on con$$nued$,$ the bill of the material topic was also brought up$.$ Alex

showed the execu$$ve team Flex Star$$s typical bill$-$of$-$materials statement and outwardly wondered if

there is any area, they should focus on to improve its cost. Packaging is a compe$$ve industry, so the

race of quality and pricing has always been cri$$cal in contribu$$ng to Flex Star$$s success. Below is a

BOL to produce $1000$ bags, with margin of $2024$ reduced quite significantly due to unchanged

pricing, an analysis needs to be done in order to help Flex Star achieve a $20\%$ margin future going

forward, assuming cost of $2024$ will stay constant un$$l the end of fiscal year $2024.$

Component Qty consume $2023$ Total Value consumed $2023$ Qty consume $2024$ Total Value consumed $2024$

Testing $5$ $ $406$ $ $50$

Resins $150$ $ $1,200168$ $ $1,512$

Pallet cover $207$ $ $1,242232$ $ $1,391$

Cores $10$ $ $5011$ $ $56$

Manufacturing Overhead $510$ $ $4,590571$ $ $5,712$

Labour Cost $185$ $ $1,850207$ $ $2,279$

Flex Star's bag$-$making division specializes in manufacturing plas$$c components for the small pet

food market. These components are produced in high$-$volume runs, with equipment o$$en opera$$ng

around the clock for consecu$$ve days to maintain produc$$on consistency. Addi$$onally$,$ the division

fulfills low$-$volume orders with unique specifica$$ons$.$ One of the machines in this department

requires replacement. Currently valued at CAD $$13,000,$ the machine must be replaced due to

upcoming safety regula$$ons$.$ This machine produces Flat botom bags of which incur fixed costs,

including deprecia$$on$,$ the relevant details of which are as follows:

Flat botom bag $($A$)$

Sales CAD $$100000$

Cost of sales

Variable costs $82000$

Fixed costs $15000$

$97000$

Annual profit $$3000$

Note that: All the fixed costs $($including depreciation$)$ are directly related to the production of Flat

bottom bag.

Projec$$ons indicate that current revenue and costs will increase $10\%$ each year for the next five

years, aligning with the expected lifespan of the new machine under review. Introducing this new

machine would reduce variable costs by CAD $$8,000$ for A$.$ Acquisi$$on and installa$$on costs for the

new machine are es$$mated at CAD $$100,000,$ with a $$10,000$ residual value a$$er five years.

Company policy dictates straight$-$line deprecia$$on for such machinery, with a cost of capital set at $10$

percent. Alex wanted to invest in this machine but was not certain about the best approach to

evaluate this investment.

As a proac$$ve CEO, Alex has been researching the plas$$c industry and came across significant

informa$$on$.$ Notably, in $2021,$ the Canadian government unveiled an ambi$$ous ini$$a$$ve aimed at

elimina$$ng Canada's plas$$c waste en$$rely by $2030($PMO$,2021).$ This ini$$a$$ve$,$ known as Zero

Plas$$c Waste $2030($ZPW$2030),$ underscores the escala$$ng global concerns surrounding the

environmental repercussions associated with plas$$c produc$$on$,$ u$$liza$$on$,$ and disposal.

The primary objec$$ve of the ZPW$2030$ policy is not