Suppose you are an operations manager at a large production facility that produces paper products. You are reviewing data findings showing that the cost of producing your brand of paper towels has risen almost twenty percent over the past six months. These costs include raw materials, equipment, labor costs, and building and administration costs. The labor contract with workers was just renewed. The pressing machines had to be upgraded. Raw materials costs are fluctuating. The following costs for making the paper towels were identified: Today’s Production Costs: The costs from six months ago are included in
In row three (Today’s Production Costs), fill out the following Excel columns with the following information. Softwood Costs – ten cents per paper towel roll. Chemical Glue and Resin Costs – two cents per paper towel roll. Equipment Costs – pressing machines – five cents per paper towel roll. Labor Costs – twenty cents per paper towel roll. Building and Administration Costs – twenty-five cents per paper towel roll. Total Paper Towel Production Costs – sixty-two cents per paper towel roll. We sell the paper towels at $1.00 per roll. You have been asked by your Chief Operating Office via email to address the following questions in an email response: What is the profit margin per paper towel roll? What are the production costs per paper towel produced? What is the significance the cost increases from the past 6 months? Why is it necessary to do a trend analysis for this situation? What are some recommendations to counteract the new setup costs?