May I get some help on this problem??

INTRODUCTION Adam, a woodworking enthusiast, lives with his family on a small farmette in rural Pennsylvania. He has been interested in woodworking since high school when his work was entered in the "Fresh Wood Student's Competition." Though he did not win the overall competition, his entry did receive the merit award for craftsmanship. Many years later, Adam now crafts wooden items to use in his own home and as gifts for his friends and extended family. Going forward, he hopes to supplement his income during retirement by making items to sell. BACKGROUND Over the last five years, Adam has invested in woodworking machines, tools, and supplies. These include a table saw ($2,495), a 16 -inch planer ($1,950), and an 8 -inch jointer ($750), the latter he bought secondhand on Craigslist. As these machines produce a significant amount of sawdust/fine-dust particles, Adam had to purchase a dust collection system and retrofitted this in his woodshop, which is a barn on his property. The cost of this system was approximately $900, excluding the time it took for him to install it. While there are many other tools and machines Adam would like to buy, he thinks the cost is prohibitive, unless he uses the items frequently. In addition to these "big ticket" items, Adam has acquired a myriad of smaller tools and supplies, such as chisels, handheld sanders, safety glasses, dust masks, sandpaper, screws, glue, and clamps. The wood Adam uses is mostly hardwoods that are native to Pennsylvania. He buys this locally for cash and his current timber "stack" costs in the region of $2,400. IMMINENT OPPORTUNITIES Cutting Boards for Realtor A local realtor has approached Adam with a business proposition. Suzie heard about Adam through word of mouth when she admired a cutting board he made for a mutual friend. She would like him to make one-off/distinct cutting boards for her clients as a house-warming gift when they use her services to purchase a home. She estimates IMA EDUCATIONAL CASE JOURNAL VOL. 15, NO. 1, ART. 1, MARCH 2022 1 (C) 2022 IMA that she would need 50 cutting boards per year and will pay between $35 and $45 depending on the size of the board (small or medium). Before committing to a long-term contract, Suzie and Adam have agreed that she will purchase an initial batch of 10 boards that will be ready in a month. Adam does his woodworking projects after work or on the weekends and does not have anyone to help him. He has all the materials on hand to make the batch of 10 boards, such as cut-off/scrap wood from other projects and glue, oil, and wax. He estimates that it will take three hours to make each board; the most labor-intensive element is sanding at roughly two hours. He is thinking of a number of alternatives for sanding: 1. Buy a drum sander, which would cost $1,250, and would cut his sanding time to one eighth. 2. Ask a semi-retired neighbor to do the sanding, using Adam's woodshop, supplies, and sanders, and pay $10 per hour-the same amount the neighbor earns in a current part-time job. that she would need 50 cutting boards per year and will pay between $35 and $45 depending on the size of the board (small or medium). Before committing to a long-term contract, Suzie and Adam have agreed that she will purchase an initial batch of 10 boards that will be ready in a month. Adam does his woodworking projects after work or on the weekends and does not have anyone to help him. He has all the materials on hand to make the batch of 10 boards, such as cut-off/scrap wood from other projects and glue, oil, and wax. He estimates that it will take three hours to make each board; the most labor-intensive element is sanding at roughly two hours. He is thinking of a number of alternatives for sanding: 1. Buy a drum sander, which would cost $1,250, and would cut his sanding time to one eighth. 2. Ask a semi-retired neighbor to do the sanding, using Adam's woodshop, supplies, and sanders, and pay $10 per hour-the same amount the neighbor earns in a current part-time job. 3. Take the boards to a local Amish woodshop that is a 45 -minute drive ( 35 miles away). He would pay to use their drum sander- $50 per hour (in increments of one hour or part thereof) that an employee would operate. This price includes all supplies. The other hour to make the boards requires work on the table saw, planer, and jointer (both before and after gluing), clamping, and finishing the boards with food-grade oils and wax. Headboard for a Friend A good friend of Adam's asked him about making a bespoke headboard for her aunt. She has perused his timber "stack" and picked out the slab that she would like him to use, even though he has not yet committed to making it. She chose one of the largest and more unique pieces of live-edge walnut purchased as a "lot" of 15 slabs that cost $1,200. Adam estimates that it would take 15 to 20 hours to make the headboard with approximately 75% of this spent on sanding it using the tools he currently owns. His sanding time, however, could be reduced considerably if he were to use one of the three options outlined previously. He knows that if he has to do all of the work himself on both projects, it is extremely unlikely he will complete them on time. Moreover, even if he could complete both projects, he does not have any idea how he would price the headboard. Note: when paying for wood you pay by the board foot. A board foot is 144 cubic inches and is equivalent to a board or slab that is 1 -inch thick x12 inches wide x12 inches long However, when buying wood, boards can be any size. For example, one could be six feet long x8 inches wide and 1 inch thick, and another board might be three feet long x11 inches wide and 2 inches thick. Assume that Adam only buys boards that are 1 inch thick. Sizes of cutting boards Small =14 inches long x8 inches wide and 3/4 inch thick finished (starts out at 1 inch thick) Medium =17 inches long x10 inches wide and 3/4 inch thick finished (starts out at 1 inch thick) Additional waste (other than thickness) is approximately 20% due to, for example, cutting with a table saw and using a planer. 34 Part \#3-Additional Analysis 4. What business strategy should Adam pursue-product differentiation or cost leadership? Explain. 5. Is Adam a price-taker or price maker? Explain why and describe the difference between the two. 36 Discuss which pricing method you would recommend Adam to use? 6. What type of costing system (process costing, job costing, and so on) might be appropriate for Adam? 37 Explain. 7. As Adam takes on new opportunities and his business grows, he will need to consider how to allocate overhead to multiple jobs or products. Explain why and give a recommendation on how this can be 38 done. 8. Comment briefly (in the last paragraph of your written report) on whether or not you think this will be a lucrative endeavor for Adam in retirement and why based on the information provided and any 39 other analysis that you have undertaken