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FREEZING OUT PROFITS CASE STUDY CAN SOLVE QUESTIONS : can searching google please help Question Secconz China Market Identify the issues faced by Cold Cuts for: Identify potential actions can be utilized to solve the issues identified in (1). Explain Just In Time (JIT) System. How the Just in Time(JIT) systems assists CC in long term period. Freezing Out Profits Hamlet Maria Norhasil PANCASE STUDIES Shivering untiments in Singapore Mr Dill, the Managing Director of Singapore's only refrigeration parts manufact, Cold Cuts Ltd (CC), had a powing feeling about the difficult moming he had just had. Fistere was a meeting with Mr Nelly, the Supply Manager from their customer Set original equipment manufacturer of refrigention products. Then, not too long where was disturbing phone call he received from the plant manager in China, Mr Risk, se venture that had just begun the year before. He had a feeling that in the first instance, he might just lost the biggest customer CC had and in the second, the plant in Chine might go down the drain as well. He'd need to wreck his brain to figure out how to get out of this mess that just yesterday he would not have thought he would ever have to fact. Aigler ing had brought out events that seemed to put Oy very existence at the Hindu through the conversations he had just had. Mr Nelly: "Good morning. Mr Del How are your Me Dali: I'm doing very well. Thank you. What can I do for you this moming Mr Nelly: "Well, I thought a Cold Cuts is a long-time partier of Second together and discuss the longer ter future of our business Aher all, we are coming toweds the end of the second year of the supply contract. (Passe) As you know, we have been facing a lot of competition from China who have been able to produce at much cheaper prices. We Seccon have been crunching some numbers as part of our overall cost reduction. We notice that your price to us is way over the material cost. We are hoping that perhaps you could see your way to reduce your price since I'm sure that you have already recuped your opiral investment. More importantly, we both have to think about the viability of our parasti the long term." (Mr Nelly shough: /hope he retuces the price at least a Himle as it will be such a hataleo how to produce similar technology In-house) Mr Dali: "Well, Mr Nelly, I understand your dilemma, but what you are producing is ofte better quality than those products from China. One of the reasons is of course our FFA.com Stan u will din net is of far better quality than our newest competitor. In fact, I believe that we providing a big benefit by allowing you to strenaline your operations. As it is, you do not have to bear the cost of overheads and we are able to pass to you the cost savings due to our economie scale since we let us an independent contracte o many other clients." (Mr Dal thought I wonder CC can enjoy the high prices and super premier for another me years) Mr Nelly: "Looking at the numbers that we have, we went convinced seat beneralfo sourcing Because your prices are so high, we are thinking that maybe we might be betreff producing the technology ourselves." Mr Dali: "We thank you for your business and we hope to be able to carry on doing so think you need to look at your other components to reduce your costs Mr Nelly "Maybe to solve all these problems, you could see your way to come to an factory arrangement with me on a personal basis?" Mr Dali: "We thank you for your business and we hope to be able to carry on doing think you need to look at your other components to reduce your costs Mr Nelly: "Maybe to solve all these problems, you could see your way factory arrangement with me on a personal basis? Mr Dali:" will bring your concerns up with the Board. I'll get back to you by the end of month Chill winds in China Later that morning, Mr Dali received an urgent phone call from the Past Manager in China Mr Ritisak Mr Rihisak: "Good moming Mt Dali, I'm afraid I have had aws for you." Mr Dali: "What is it Me Ritisak Mr Rithik "As you know, China has seriously been cracking down at they call dumping activities. A contingent of their trade officials gave us a surprise is this morning They informed us that the United States Interational Trade Commissie has been inven tions on our exports from here to the US." Mr Dali: "What is the basis of their investigation? We haven't done anything wrong! The machines we sent you are still doing well, right? Have you been maintaining them according to our instructions? Scanie WILT Cams Mr Ritisak "Yes, we have se neording to the law, they are saying the icing our products much lower than the fair value. Of course, can do this bar basis the machines have already been written down. They say if they find us to be gally they will either close us down or at the very least levy a huge anti-dumping taxes. I'm not quite sure why this has happened as this is the first time I hearing about this. However, I think the real issue is that they want some bribes to smoother things out for us. One of those who came with the local agency w one of my staff privately and said that is made some personal rangements with him he can make the case po away. I'm only worried that, even if we're not doing anything wrong, the authorities might still shuts down long enough for us to get into trouble with our customers." Mc Dali don't think they have a case against us. I will send you our accountant to see what can be done." CC in the refrigeration industry-cold hard fans Cold Cuts Ltd. (better known as "CC) was a manufacturing concem in Singapore in refrigeration components. The company developed its own brand of refrigeration process technology known as Fuzzy Frost, and their products were exported worldwide Refrigeration technology in its basic form had not altered much since is on Ayis provements became subject to easy copying and the greater automation of the manufacturing process had always been feasible CC was essentially a subcontractor of components for customers who were onginal equipment manufacturers (OEMs). It was a company from which relligeration manufactures coured their special components. Nevertheless. CC not only faced competition from suppliers of time tar products, it was also vulnerable should customers decide so manufacture that is bouton their own their own Super cool profits in Singapore Two years ago, CC had a major development - the introduction of the new upgraded Fuzzy Frost Alpha system. The FFA component was a complex pans that allowed enhanced features in the refrigerator that enabled perishable items to be stored for longer than conventional fridges Scanne Wilt Cams CC installed new machines in Singapore plant to produce the wonded Pay Frost Alpha (FFA). The higher quality FFA rapidly became popular in the advanced market of Singapore and Europe Seccon was CC's main customer in Singapore. CC supplied Seccon with not only the FFA technology but a host of other parts as well. CC charged Seconda hefty premium Secco for the FFA. The justification was that it was a new technology and CC was the only Singapor can supplier for the part and could meet the "justin-time" delivery requirements CC sold the FFA component only to Secconz, locally. Export models of FFA were sold to E ropean customers at much cheaper prices against competing European Technologies CC was able to achieve payback on its investment in the new machinery with me years despite the rapid obsolescence of the FFA technology. Nevertheless, they continued to charge the same premium price to Seccona. At that time, every unit of FFA was able to provide substantial contribution margin since the cost of the new plant machinery had already been cod. Fuzzy Prest expansion into China At the same time, two years ago as starting FFA in Singapore, CC decided to the use the machines that made the old Funky Frost and had these installed in a factory there. The stategie move to open a plant in China enabled the company to realise several benefits. Fiatalowed expansion into a new market at a much lower cost. Chim had much lower labour costs and although producing the older types of components, the new plast proved extremely profile for the past almost two years. Cold desserts Mr Dalistined quickly from his lone rumination to call the Chairman of CC we decided to call for an emergency Board meeting. The Chairman has asked him to provide least information and to submit his recommendations. The Chairman also wanted to protected ensure its survival. Furthermore, he was concerned with how it will impact de statutory porting requirement on the matters in question considering the financial yeu and just werk away. The main agenda of the meeting must focus on the way forward to and the protection of the company from these potentially harmful situations Suailleu will dins Sudin eu WILT Udins ARINI Mr Dali pondered on the two potentially disastrous situations, either of which could sell the end of CC. He jotted on his writing pad work that needed to be done ahead of the Board meet ing: 1. Explain to the board how the problem with Sesconz can be damaging financially 2. What are the strategic options for the CC Board? 3. What are CC's reporting obligations? 4. What are the implications on the financial statements? What accounting standards are relevant to present a better picture of the CC's performance and valuation of its asses? 5. How should the request for a bribe be handled and what are the potential consequences of the various options open to them? 6. Saillieu WiII HIS APPENDIX A PRODUCT COSTING OF FUZZY FROST ALPHA SALE TO SECCONZ Per date 50 Direct materials Direct labour Direct costs Factory overheads Scale WILIGHISO APPENDIX A PRODUCT COSTING OF FUZZY FROST ALPHA SALE TO SECCONZ Per 5 Direct materials Direct labow 10 50 Direct costs Factory overheads comprising nufineer materials and labour and other overheads bor exchatting winery depreciation) Manufacturing cost Margin before machinery depreciation and administration costs $8 32 Selling price from Cold Cuts to Secconz 140 Cold Cuts Singapors Secent European Customers Annual Sales (Units) Total (5000) 25.000 3,500 50.000 25.000 8.500 Margie Per Unit (5) Total (5000) 2.050 3.000 1S Notes: 1. Capital cost of machinery required for the production of FFA was $8.5 milion 2. Secconz's annual requirement was for 25.000 units of FFA 3. Sales volume to Seccon equals one third of all FFA sales of Cold Cuts 4. Selling price to customers other than Seccon wat $100 per unit (all exports) Scane witrans FREEZING OUT PROFITS CASE STUDY CAN SOLVE QUESTIONS : can searching google please help Question Secconz China Market Identify the issues faced by Cold Cuts for: Identify potential actions can be utilized to solve the issues identified in (1). Explain Just In Time (JIT) System. How the Just in Time(JIT) systems assists CC in long term period. Freezing Out Profits Hamlet Maria Norhasil PANCASE STUDIES Shivering untiments in Singapore Mr Dill, the Managing Director of Singapore's only refrigeration parts manufact, Cold Cuts Ltd (CC), had a powing feeling about the difficult moming he had just had. Fistere was a meeting with Mr Nelly, the Supply Manager from their customer Set original equipment manufacturer of refrigention products. Then, not too long where was disturbing phone call he received from the plant manager in China, Mr Risk, se venture that had just begun the year before. He had a feeling that in the first instance, he might just lost the biggest customer CC had and in the second, the plant in Chine might go down the drain as well. He'd need to wreck his brain to figure out how to get out of this mess that just yesterday he would not have thought he would ever have to fact. Aigler ing had brought out events that seemed to put Oy very existence at the Hindu through the conversations he had just had. Mr Nelly: "Good morning. Mr Del How are your Me Dali: I'm doing very well. Thank you. What can I do for you this moming Mr Nelly: "Well, I thought a Cold Cuts is a long-time partier of Second together and discuss the longer ter future of our business Aher all, we are coming toweds the end of the second year of the supply contract. (Passe) As you know, we have been facing a lot of competition from China who have been able to produce at much cheaper prices. We Seccon have been crunching some numbers as part of our overall cost reduction. We notice that your price to us is way over the material cost. We are hoping that perhaps you could see your way to reduce your price since I'm sure that you have already recuped your opiral investment. More importantly, we both have to think about the viability of our parasti the long term." (Mr Nelly shough: /hope he retuces the price at least a Himle as it will be such a hataleo how to produce similar technology In-house) Mr Dali: "Well, Mr Nelly, I understand your dilemma, but what you are producing is ofte better quality than those products from China. One of the reasons is of course our FFA.com Stan u will din net is of far better quality than our newest competitor. In fact, I believe that we providing a big benefit by allowing you to strenaline your operations. As it is, you do not have to bear the cost of overheads and we are able to pass to you the cost savings due to our economie scale since we let us an independent contracte o many other clients." (Mr Dal thought I wonder CC can enjoy the high prices and super premier for another me years) Mr Nelly: "Looking at the numbers that we have, we went convinced seat beneralfo sourcing Because your prices are so high, we are thinking that maybe we might be betreff producing the technology ourselves." Mr Dali: "We thank you for your business and we hope to be able to carry on doing so think you need to look at your other components to reduce your costs Mr Nelly "Maybe to solve all these problems, you could see your way to come to an factory arrangement with me on a personal basis?" Mr Dali: "We thank you for your business and we hope to be able to carry on doing think you need to look at your other components to reduce your costs Mr Nelly: "Maybe to solve all these problems, you could see your way factory arrangement with me on a personal basis? Mr Dali:" will bring your concerns up with the Board. I'll get back to you by the end of month Chill winds in China Later that morning, Mr Dali received an urgent phone call from the Past Manager in China Mr Ritisak Mr Rihisak: "Good moming Mt Dali, I'm afraid I have had aws for you." Mr Dali: "What is it Me Ritisak Mr Rithik "As you know, China has seriously been cracking down at they call dumping activities. A contingent of their trade officials gave us a surprise is this morning They informed us that the United States Interational Trade Commissie has been inven tions on our exports from here to the US." Mr Dali: "What is the basis of their investigation? We haven't done anything wrong! The machines we sent you are still doing well, right? Have you been maintaining them according to our instructions? Scanie WILT Cams Mr Ritisak "Yes, we have se neording to the law, they are saying the icing our products much lower than the fair value. Of course, can do this bar basis the machines have already been written down. They say if they find us to be gally they will either close us down or at the very least levy a huge anti-dumping taxes. I'm not quite sure why this has happened as this is the first time I hearing about this. However, I think the real issue is that they want some bribes to smoother things out for us. One of those who came with the local agency w one of my staff privately and said that is made some personal rangements with him he can make the case po away. I'm only worried that, even if we're not doing anything wrong, the authorities might still shuts down long enough for us to get into trouble with our customers." Mc Dali don't think they have a case against us. I will send you our accountant to see what can be done." CC in the refrigeration industry-cold hard fans Cold Cuts Ltd. (better known as "CC) was a manufacturing concem in Singapore in refrigeration components. The company developed its own brand of refrigeration process technology known as Fuzzy Frost, and their products were exported worldwide Refrigeration technology in its basic form had not altered much since is on Ayis provements became subject to easy copying and the greater automation of the manufacturing process had always been feasible CC was essentially a subcontractor of components for customers who were onginal equipment manufacturers (OEMs). It was a company from which relligeration manufactures coured their special components. Nevertheless. CC not only faced competition from suppliers of time tar products, it was also vulnerable should customers decide so manufacture that is bouton their own their own Super cool profits in Singapore Two years ago, CC had a major development - the introduction of the new upgraded Fuzzy Frost Alpha system. The FFA component was a complex pans that allowed enhanced features in the refrigerator that enabled perishable items to be stored for longer than conventional fridges Scanne Wilt Cams CC installed new machines in Singapore plant to produce the wonded Pay Frost Alpha (FFA). The higher quality FFA rapidly became popular in the advanced market of Singapore and Europe Seccon was CC's main customer in Singapore. CC supplied Seccon with not only the FFA technology but a host of other parts as well. CC charged Seconda hefty premium Secco for the FFA. The justification was that it was a new technology and CC was the only Singapor can supplier for the part and could meet the "justin-time" delivery requirements CC sold the FFA component only to Secconz, locally. Export models of FFA were sold to E ropean customers at much cheaper prices against competing European Technologies CC was able to achieve payback on its investment in the new machinery with me years despite the rapid obsolescence of the FFA technology. Nevertheless, they continued to charge the same premium price to Seccona. At that time, every unit of FFA was able to provide substantial contribution margin since the cost of the new plant machinery had already been cod. Fuzzy Prest expansion into China At the same time, two years ago as starting FFA in Singapore, CC decided to the use the machines that made the old Funky Frost and had these installed in a factory there. The stategie move to open a plant in China enabled the company to realise several benefits. Fiatalowed expansion into a new market at a much lower cost. Chim had much lower labour costs and although producing the older types of components, the new plast proved extremely profile for the past almost two years. Cold desserts Mr Dalistined quickly from his lone rumination to call the Chairman of CC we decided to call for an emergency Board meeting. The Chairman has asked him to provide least information and to submit his recommendations. The Chairman also wanted to protected ensure its survival. Furthermore, he was concerned with how it will impact de statutory porting requirement on the matters in question considering the financial yeu and just werk away. The main agenda of the meeting must focus on the way forward to and the protection of the company from these potentially harmful situations Suailleu will dins Sudin eu WILT Udins ARINI Mr Dali pondered on the two potentially disastrous situations, either of which could sell the end of CC. He jotted on his writing pad work that needed to be done ahead of the Board meet ing: 1. Explain to the board how the problem with Sesconz can be damaging financially 2. What are the strategic options for the CC Board? 3. What are CC's reporting obligations? 4. What are the implications on the financial statements? What accounting standards are relevant to present a better picture of the CC's performance and valuation of its asses? 5. How should the request for a bribe be handled and what are the potential consequences of the various options open to them? 6. Saillieu WiII HIS APPENDIX A PRODUCT COSTING OF FUZZY FROST ALPHA SALE TO SECCONZ Per date 50 Direct materials Direct labour Direct costs Factory overheads Scale WILIGHISO APPENDIX A PRODUCT COSTING OF FUZZY FROST ALPHA SALE TO SECCONZ Per 5 Direct materials Direct labow 10 50 Direct costs Factory overheads comprising nufineer materials and labour and other overheads bor exchatting winery depreciation) Manufacturing cost Margin before machinery depreciation and administration costs $8 32 Selling price from Cold Cuts to Secconz 140 Cold Cuts Singapors Secent European Customers Annual Sales (Units) Total (5000) 25.000 3,500 50.000 25.000 8.500 Margie Per Unit (5) Total (5000) 2.050 3.000 1S Notes: 1. Capital cost of machinery required for the production of FFA was $8.5 milion 2. Secconz's annual requirement was for 25.000 units of FFA 3. Sales volume to Seccon equals one third of all FFA sales of Cold Cuts 4. Selling price to customers other than Seccon wat $100 per unit (all exports) Scane witrans