Jiambalvo Case 7-2 Five Star Tools Essay - 773 Words

Case 7-2 Five Star Tools This report provides an analysis and evaluation of constraints in the production process for the Model C210 and the Model D400 of the Five Star Tools product line. The significant growth the company has experienced in recent years has led to a strain on the firm’s production capacity. This report seeks to determine how to loosen constraints on production and identify the most profitable product line given current production limitations. Incremental analysis is used to determine both the benefit of one additional hour of production time in the coating and sharpening process and the incremental yearly profit associated with adding a new inspection station. Five Star Tools is a small family-owned firm that†¦show more content†¦Data indicates that Model C210 has a higher contribution margin per unit of the constraint. Therefore it is recommended that until the constraints in coating and sharpening are removed, production should concentrate its limited resources on produc tion of the more profitable model. The Model C210 contributes $1250 per hour compared to $537.50 per hour given the constraint in the coating and sharpening stage. The Theory of Constraints indicates that excess capacity from ‘subordinate’ departments should be utilized to lessen the strain on the bottlenecked department. Until the constraint on production has been removed management should subordinate everything else to the constraint. The proposed action of outsourcing inspection from the coating and sharpening department will free-up more valuable direct labor hours in the area of constraint. A separate inspection station before the final stage of production should be added to the production process. An employee from the chemical bathing stage will be cross-trained to inspect products as needed for the brief periods of inspection required. Because the second process has been deemed subordinate to the area experiencing constraint its excess capacity can be utilized in a more valuable capacity. Each additional hour in the coating and sharpening process will result in a firm benefit of $1250, or the contribution margin per unit of constraint for the Model C210. The addition of an inspectionShow MoreRelated5star Tools Case Study849 Words   |  4 PagesBUS5431 - Managerial Accounting Individual  Case Study 7-2 FIVE STAR TOOLS James Jiambalvo – Chapter 7 Case 2 Submitted by: K Greene Executive Summary: Five Star Tools is a small family-owned business that manufactures diamond-coated cutting tools (chisels and saws) used by jewelers. The production of these tools involves three major processes. The first of these processes involves steel â€Å"blanks† (tools without the diamond coating) that are cut to size. The second process involvesRead MoreIntangible Asset Accounting and Accounting Policy Selection in the Football Industry85391 Words   |  342 PagesTreatment of Intangible Assets 1.1 1.2 1.3 1.4 The Nature of Intangible Assets The Importance of Intangible Assets Development of Accounting Standards for Intangible Assets in the UK International Accounting Standards for Intangible Assets Page 1 5 2 The Measurement of Intangible Assets 2.1 2.2 2.3 Financial Reporting Requirements Valuation Models The Amortisation of Intangible Assets 26 3 Human Resource Accounting 3.1 3.2 3.3 3.4 3.5 The Human Resource as an Asset The Relevance of