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The Paper Products Factory (PPF) is a local manufacturer of a single product paper party hats. They sell primarily to specialty stores in the

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The Paper Products Factory (PPF) is a local manufacturer of a single product paper party hats. They sell primarily to specialty stores in the Mid-Atlantic region of the United States. There are several other national and intemational manufacturers of similar products; therefore, it is a very competitive marketplace. The market is very price sensitive, small increases in price can result in large decreases in product demand. The PPF is a family owned company that employs approximately 100 people. The owner and CEO of the company is Brian Clark. At this time no other family members are involved in the business. The company employs administrative staff including the president, vice presidents, and support staff, engineers who design and develop the products; sales representatives; manufacturing labor; distribution center employees, and customer service representatives. Patrick Clark, the owner's son, recently completed his M.B.A. Wanting to impress his father with his newly acquired skills, he presented his father with a business proposal to add a second product line- paper chains. "Dad, by adding paper chains, we can expand our product line to our existing customer base. For the most part, our current sales and customer service structure can remain as is since we will be selling more products to our existing customers. We would need to add an additional Production Manager to oversee the new product line. We have excess manufacturing capacity, skilled labor, and almost all the manufacturing equipment necessary to make the chains. We can offer our hourly employees more steady work. The only additional costs will be the additional capital investment involved due to the purchase of some specialized cutting machines, which will cost $180,000 and can be expected to last about five years. We'll also have to lease a bit more space." Brian Clark though it over for a few days. "Patrick, your proposal makes sense to me. By adding a product line, we should be able to decrease our unit product costs because our fixed costs will be spread over many more units. This should be good for the new chain product line and the hat product line. I can get additional manufacturing space by moving our administrative offices out of our manufacturing site and into an office complex nearby. This will free up more space in the factory. I looked in to the purchase of the cutting machines and it seems that we will be able to finance the purchase at a low interest rate. There's only one more thing to consider. I will implement your idea only on the condition that you will join the company as the production manager for paper chains." Patrick agreed and is now the Paper Chain Production Manager reporting to the Director of Manufacturing. There are a variety of manufacturing departments that are involved in producing the products including Warehouse, Materials Handling, Cutting, Assembly, Finishing, Quality Control, and Factory Supervisor. Supervision is provided throughout the process. Quality Control is provided at the end of the manufacturing process. A description of each department and a diagram of the factory floor is included in Figure 1 (Appendix) - Description of Manufacturing Departments Panel A and Panel B. The PPF utilizes job order costing by assigning direct material, direct labor, and manufacturing overhead t each individual job. The costs are accumulated using a Job Cost

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