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 100 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. Exhibit 1 FINEPRINT COMPANY Summary of Monthly Operating Costs Manufacturing costs: Direct material - variable Direct labor - variable Direct labor - fixed Manufacturing overhead - variable Manufacturing overhead - fixed Total manufacturing costs Nonmanufacturing costs: Sales - variable Sales - fixed Corporate fixed Total nonmanufacturing costs Total costs Monthly costs at 150,000 volume $ 6,000 1,500 3,000 1,500 3,375 $15,375 1,500 1,875 3,750 $7,125 $22,500 A 6 # brochures in each unit 7 # of units 8 9 10 11 Manufacturing costs: 12 Direct material, variable 13 Direct labor, variable 14 Direct labor, fixed 15 Manufacturing overhead, variable 16 Manufacturing overhead, fixed 17 Total manufacturing costs 18 19 Nonmanufacturing costs: 20 Marketing, variable 21 Marketing, fixed 22 Corporate, fixed 23 Total nonmanufacturing costs 24 Total costs 25 26 Variable manufacturing costs per unit 27 Variable nonmanufacturing costs per unit 28 Fixed manufacturing costs per unit 29 Fixed nonmanufacturing costs per unit 30 B Cost per 100 brochures Monthly costs at 150,000 volume $6,000 1,500 3,000 1,500 3,375 $15,375 $1,500 1,875 3,750 $7,125 $22,500 D E Cost per 100 brochures F Monthly costs at 120,000 volume Read the FinePrint case PDF and complete each of the requirements by inserting text-based responses below each question. Use the FinePrint Excel Template for quantitative items, as indicated. Required: 1. EXCEL: In the FinePrint Excel Template provided (Exhibit 1 tab), 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. 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? Variable Costs Fixed Costs Per-Unit Costs Total 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 item 1 (above) to prepare a cost analysis for the new level of production. Complete the highlighted cells in columns E and F in the Exhibit 1 worksheet to compute/present your answer. Use Excel formulas and feed data from cells, as appropriate. FinePrintCase.docx, page - 2 - 5. Review the cost analyses you computed in Excel and explain why some of the manufacturing and nonmanufacturing costs are different depending on the volume of brochures produced and some are the same. Be sure to consider both per-unit and total costs in your response. 6. Provide a brief reflection on what you have 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. 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 100 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. Exhibit 1 FINEPRINT COMPANY Summary of Monthly Operating Costs Manufacturing costs: Direct material - variable Direct labor - variable Direct labor - fixed Manufacturing overhead - variable Manufacturing overhead - fixed Total manufacturing costs Nonmanufacturing costs: Sales - variable Sales - fixed Corporate fixed Total nonmanufacturing costs Total costs Monthly costs at 150,000 volume $ 6,000 1,500 3,000 1,500 3,375 $15,375 1,500 1,875 3,750 $7,125 $22,500 A 6 # brochures in each unit 7 # of units 8 9 10 11 Manufacturing costs: 12 Direct material, variable 13 Direct labor, variable 14 Direct labor, fixed 15 Manufacturing overhead, variable 16 Manufacturing overhead, fixed 17 Total manufacturing costs 18 19 Nonmanufacturing costs: 20 Marketing, variable 21 Marketing, fixed 22 Corporate, fixed 23 Total nonmanufacturing costs 24 Total costs 25 26 Variable manufacturing costs per unit 27 Variable nonmanufacturing costs per unit 28 Fixed manufacturing costs per unit 29 Fixed nonmanufacturing costs per unit 30 B Cost per 100 brochures Monthly costs at 150,000 volume $6,000 1,500 3,000 1,500 3,375 $15,375 $1,500 1,875 3,750 $7,125 $22,500 D E Cost per 100 brochures F Monthly costs at 120,000 volume Read the FinePrint case PDF and complete each of the requirements by inserting text-based responses below each question. Use the FinePrint Excel Template for quantitative items, as indicated. Required: 1. EXCEL: In the FinePrint Excel Template provided (Exhibit 1 tab), 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. 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? Variable Costs Fixed Costs Per-Unit Costs Total 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 item 1 (above) to prepare a cost analysis for the new level of production. Complete the highlighted cells in columns E and F in the Exhibit 1 worksheet to compute/present your answer. Use Excel formulas and feed data from cells, as appropriate. FinePrintCase.docx, page - 2 - 5. Review the cost analyses you computed in Excel and explain why some of the manufacturing and nonmanufacturing costs are different depending on the volume of brochures produced and some are the same. Be sure to consider both per-unit and total costs in your response. 6. Provide a brief reflection on what you have 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