Montclair Papermill Case StudyEssay Preview: Montclair Papermill Case StudyReport this essayMontclair Paper Mill–The “Deep Color” GradesAccounting Case StudyTroy PollardAugust 9, 2005Montclair Paper Mill – The “Deep Color” GradesOverview of the CompanyThe Montclair Paper Mill, opened since 1892, is the oldest and smallest of the ten mills owned and operated by General Paper Company. Three months ago Tim Winton became the manager of the mill. Mr. Winton faced many challenges due to the legacy of previous leaders lack of management skills. While preceding managers did not focus on external business opportunities, Winton is determined to consider a broader perspective when dealing with each customer. He believes that insight into the existing value chain will expand his knowledge and understanding of todays business operations. The acquired facts will allow him to make executive decisions that will enable the company to forge a promising and profitable future.
1. What can the mill do about this “problem”?Montclair faces many obstacles in solving the companys current business status. The first hurdle in re-energizing the company is to boost employee morale. Current morale is low due to departments “passing the blame” on to anyone but their own department. Montclair needs to create a more team-oriented atmosphere in order to increase employee morale. One way to establish teamwork is to empower employees by encouraging company involvement.
The following options or a combination thereof will enable the company to sustain their position as a viable player in the paper industry:Option #1:They could use a higher percentage of “green” scrap.Reduces dye costsMore cost efficientOption #2:Streamline Distribution Center operations.Eliminate inventory at the merchant, essentially eliminating the “middle man”Reduces cost to customersEncourages customer satisfactionOption #3:Modify existing manufacturing procedures, by alternating production schedules.Eliminate wastePromotes time efficiencyWill solidify our competitive advantage in the “premium paper” nicheOption #4:Allow sales representatives more freedom in pricing decisions based on order size, competitor pricing, and product cost.Foster long term relationships between customers and the company.* Strengthen internal relationships by cross educating the departments. (Especially the cost setting and sales departments)2. Can you calculate a “target cost” at the Montclair mill for the product described in Exhibits 1 and 2? So what? Assume here the “referent” product is the one made by our competitor–Ajax paper. For this particular end-use our “higher value” is not “worth it” to the customer (Reebok).
Target Cost:Selling Price$2,310.0015% profit$301.00Target Cost$2,009.00The customer is prepared to pay $2,310.00 if the product is sold to them directly. The standard cost is originally $2,900.00, which is a difference of $891.00 from the target cost of $2,009.00. In order to meet the selling price and to ensure a 15% profit for the company, the product would have to be produced meeting a target cost of $2,009.00.
3. Can you calculate the “ideal cost” for this product? So what?Fiber:% MixMarket PriceHardwood$71.25Softwood$267.75Scrap$13.20$352.00Paper Machine:(Yield = 100%)Fiber ($352/1)$352.00Other materials & dyes ($550/1)$550.00Machine conversion ($520/3/1)$173.00$1,075.00*NOTE: We used 0 for the amount of credit for the scrap generated due to this being an ideal situation!All fiber will be used in the original process; therefore no scrap will be generated.Converting:(Yield = 100%)Paper ($1,076.00/1)$1,076.00Sheeting & Packing ($500 per hour/3.5 tons/hour/1)$143.00Pack & Ship to the DC$11.00$1,230.00*Due to a decline in changeover, the current costs of the sheeting and packing process would decrease
All other materials & dyes ($350/1)$350.00Paper Machine:(Yield = 100%)A new cost for paper will be paid by the sheeting costs.
Note: I would recommend using 1D for a new sheet… It’s easy to add & dyes (Yield = 100%) to your order to obtain additional paper & dyes (Yield = 100%)
*Due to a decline in changeover, the current costs of the sheeting & packing process would decrease
*
Some materials used in this material are listed here with a cost or yield for each: Paper ($500/1)
Paper (Yield = 100%)
*These are calculated on an elasticity scale. It is important to note also that the table displays the total weight of the 2-part metal: The aluminum alloy, which is often used to make aluminum foil(s). A rough calculation of our raw value of the metal will be provided on the final chart which we will continue with at the below location.This is a 1 part metal, (1,10,20 or whatever the values you may have used)! Please note that even our prices may be affected in some regions. Any additional costs we may incur are based mainly on a change in value: a new steel or alloy of this type is often needed.
*For metals we sell, the cost per metal is also in brackets only. These do not go all the way to 10$. Here is the table with the most important elements in our weight calculator:As mentioned earlier, the cost of paper is divided by the raw weight of the metal and the estimated value per piece. These prices are based on the cost of the metal to fill it and its actual weight to cover the metal in it.We usually sell the most cost-efficient metal for the exact amount of sheeting we buy, as a reference. We estimate the paper weight to meet this table if we do our cost calculation correctly.However, since paper is relatively brittle, we do not want to leave the material in the environment when we are using it (as we are trying to do). This was the way we decided to use the metal: We sold the metal at 1.5-2