Description
This is about Case analysis of Uhuru Candle Company, Ltd.
CASE: UHURU CANDLE COMPANY, LTD.
Analysed by: Group L1 Abhishek Vyas Anubhav Tripathi Arpita Verma Girish Shetty Vamsi Krishna Yevvari
FACTS AND FIGURES IN BRIEF
Management trainee, Joseph Ziggundu, assigned to take over and operate the Uhuru Candle Company (UCC) ? UCC previously privately run ? Possibly no records , no keys, to break locks, if needed ? Great demand of candles as no other maker in the entire country ? No operating budget, hoping to have sufficient raw materials, survive with self generated funds ? Not accepted any liabilities or debt of previous owners
?
PRODUCTION PROCESS
Twisting of candle into multiple stranded candle wick ? Wind the wick on one half of the iron frame and join with the other half ? Pour hot wax into the upright frame in two passes, left to settle ? Candles lifted out from frame, finished ? Packed 6 to a box, 12 boxes to a carton
?
VARIOUS PRICING OF THE CANDLES
? Retail
price: Sh. 4.5/ box ? As per govt. rules: Sh. 2.7/ box (Sh.32.4/carton) ? Price at Capital city shops: Sh. 10/ box ? Smuggled candles: Sh. 3 or more per candle
COST OF RAW MATERIALS, LABOUR WAGES
Paraffin wax: Sh. 5.60/kg ? Cotton thread: Sh. 50 cents/kg ? Boxes: 15 cents/ piece (imported) ? Carton: 60 cents/ piece (imported) ? Refilling the cylinder: Sh. 55 each ? Wages of worker women: Sh. 7 / day
?
PROBLEM STATEMENT 1
Based of the first five days of operation, how is UHURU CANDLE COMPANY doing?
DAY 1: OCTOBER 16
Item Paraffin wax Amount 150 Kg (estimated amt. already in drums) + 160 Kg (issued) 6 spools 16 boxes @ Sh. 4.5 Sh. 72 Earning Expenditure
Cotton thread Sales
Gas cylinders
Nil
DAY 2: OCTOBER 17
Item Paraffin wax Cotton thread Sales Amount 240 Kg (issued) 9 spools 19 cartons @ Sh. 32.40 Sh. 615.60 Earning Expenditure
12 boxes @ Sh. 4.50
Gas cylinders 1
Sh. 54
Sh. 55
DAY 3: OCTOBER 18
Item Paraffin wax Cotton thread Sales Gas cylinders Amount 280 Kg (issued) 8 spools 40 cartons @ Sh. 32.40 1 Sh. 1296 Sh. 55 Earning Expenditure
Assumption: Selling rate assumed to be at govt. price (Sh. 32.40) since it is not mentioned.
DAY 4: OCTOBER 19
Item Paraffin wax Cotton thread Sales Gas cylinders Amount 160 Kg (issued) 2 spools 28 cartons @ Sh. 32.40 1 Sh. 907.20 Sh. 55 Earning Expenditure
Assumption: Selling rate assumed to be at govt. price (Sh. 32.40) since it is not mentioned.
DAY 5: OCTOBER 20
Item Paraffin wax Cotton thread Sales Gas cylinders Amount 280 Kg (issued) 9 spools 75 cartons @ Sh. 32.40 1 Sh. 2430 Sh. 55 Earning Expenditure
Assumption: Selling rate assumed to be at govt. price (Sh. 32.40) since it is not mentioned.
TOTAL EARNINGS DUE TO SALES IN 5 DAYS
Sh. 72 + Sh. 615.60 + Sh. 54 + Sh. 1296 + Sh. 907.20 + Sh. 2430 = Sh. 5374.80
TOTAL COST OF RAW MATERIAL UTILIZED FROM STOREROOM DURING 5 DAYS OF OPERATION
Paraffin wax: 150 (estimated amt. in drum initially) + 4 bags + 6 bags + 7 bags + 4 bags + 7 bags = 1270 kg Total unused candles weight = 58.275 kg Cost: 1211.725 X5.6 = Sh. 6785.66 ? Cotton spools: 6 + 9 + 8 + 2 + 9 = 34 spools Cost: 34 X 0.50 = Sh. 17
?
TOTAL COST OF RAW MATERIAL UTILIZED FROM STOREROOM DURING 5 DAYS OF OPERATION
Boxes used: 16 + 19 X 12 + 12 + 40 X 12 + 28 X 12 + 75 X 12 = 1972 boxes Cost: 1972 X 0.15 = Sh. 295.80 ? Cartons: 19 + 40 + 28 + 75 = 162 Cost: 162 X 0.60 = Sh. 97.20 ? Refilling gas: 55 X 3 = Sh. 165 ? Wages to workers: Sh. 7 X 15 X 5 = Sh. 690
?
TOTAL COST INCURRED
Sh. 6785.66 + Sh. 17 + Sh. 295.80 + Sh. 97.20 + Sh. 165 + Sh. 525 = Sh. 7915.66
Net deficit
Cost of raw materials – Earnings due to sales
Sh. 7915.66 – Sh. 5374.8 = Sh. 2540.86
CONCLUSION
The UCC has been successful in starting the operation plant once again ? Since the demand is brisk all candles are sold within a day or two of production ? Considering the cost of raw materials being used, UCC is not doing well in terms of profits ? Once the present store of raw materials is exhausted the cost of production will exceed the revenues
?
PROBLEM STATEMENT 2
Can Uhuru candles be profitable , given present cost levels and government prices?
Assumptions: • Weight of the wick used in a candle is negligible and does not contribute to the overall weight of the candle (45 gms) •The gas utilization is averaged on a daily basis •The production per day is 10 turns
PARAMETERS CONTRIBUTING TO THE PRODUCTION
COST
•Paraffin •Wick •Wages •Gas
wax
filling
•Cartons •Cardboards
TOTAL PRODUCTION COST (PER DAY)
Total number of candles produced everyday (10 turns): 5760
Parameter Paraffin wax Wages
Cost Sh. 5.6 / kg Sh. 7 per hour
Quantity used per day 259.2 kg 120 hrs 80 cartons 960 boxes
Productio n cost 1451.52 840
Gas filling
Cartons Boxes Total
Sh. 27.5 /day
60 cents 15 cents
27.5
48 144 2511.02
ANALYSIS
Government Subsidized price = Sh. 32.4 per carton Average selling price per candle = 45 cents Daily revenue = Sh. 2592
Daily profit = Revenue – Production cost 2592 – 2511.02 = Sh. 80.98
Result :- The Uhuru candle company is profitable according to the present subsidized government prices
THANK YOU
doc_240577540.pptx
This is about Case analysis of Uhuru Candle Company, Ltd.
CASE: UHURU CANDLE COMPANY, LTD.
Analysed by: Group L1 Abhishek Vyas Anubhav Tripathi Arpita Verma Girish Shetty Vamsi Krishna Yevvari
FACTS AND FIGURES IN BRIEF
Management trainee, Joseph Ziggundu, assigned to take over and operate the Uhuru Candle Company (UCC) ? UCC previously privately run ? Possibly no records , no keys, to break locks, if needed ? Great demand of candles as no other maker in the entire country ? No operating budget, hoping to have sufficient raw materials, survive with self generated funds ? Not accepted any liabilities or debt of previous owners
?
PRODUCTION PROCESS
Twisting of candle into multiple stranded candle wick ? Wind the wick on one half of the iron frame and join with the other half ? Pour hot wax into the upright frame in two passes, left to settle ? Candles lifted out from frame, finished ? Packed 6 to a box, 12 boxes to a carton
?
VARIOUS PRICING OF THE CANDLES
? Retail
price: Sh. 4.5/ box ? As per govt. rules: Sh. 2.7/ box (Sh.32.4/carton) ? Price at Capital city shops: Sh. 10/ box ? Smuggled candles: Sh. 3 or more per candle
COST OF RAW MATERIALS, LABOUR WAGES
Paraffin wax: Sh. 5.60/kg ? Cotton thread: Sh. 50 cents/kg ? Boxes: 15 cents/ piece (imported) ? Carton: 60 cents/ piece (imported) ? Refilling the cylinder: Sh. 55 each ? Wages of worker women: Sh. 7 / day
?
PROBLEM STATEMENT 1
Based of the first five days of operation, how is UHURU CANDLE COMPANY doing?
DAY 1: OCTOBER 16
Item Paraffin wax Amount 150 Kg (estimated amt. already in drums) + 160 Kg (issued) 6 spools 16 boxes @ Sh. 4.5 Sh. 72 Earning Expenditure
Cotton thread Sales
Gas cylinders
Nil
DAY 2: OCTOBER 17
Item Paraffin wax Cotton thread Sales Amount 240 Kg (issued) 9 spools 19 cartons @ Sh. 32.40 Sh. 615.60 Earning Expenditure
12 boxes @ Sh. 4.50
Gas cylinders 1
Sh. 54
Sh. 55
DAY 3: OCTOBER 18
Item Paraffin wax Cotton thread Sales Gas cylinders Amount 280 Kg (issued) 8 spools 40 cartons @ Sh. 32.40 1 Sh. 1296 Sh. 55 Earning Expenditure
Assumption: Selling rate assumed to be at govt. price (Sh. 32.40) since it is not mentioned.
DAY 4: OCTOBER 19
Item Paraffin wax Cotton thread Sales Gas cylinders Amount 160 Kg (issued) 2 spools 28 cartons @ Sh. 32.40 1 Sh. 907.20 Sh. 55 Earning Expenditure
Assumption: Selling rate assumed to be at govt. price (Sh. 32.40) since it is not mentioned.
DAY 5: OCTOBER 20
Item Paraffin wax Cotton thread Sales Gas cylinders Amount 280 Kg (issued) 9 spools 75 cartons @ Sh. 32.40 1 Sh. 2430 Sh. 55 Earning Expenditure
Assumption: Selling rate assumed to be at govt. price (Sh. 32.40) since it is not mentioned.
TOTAL EARNINGS DUE TO SALES IN 5 DAYS
Sh. 72 + Sh. 615.60 + Sh. 54 + Sh. 1296 + Sh. 907.20 + Sh. 2430 = Sh. 5374.80
TOTAL COST OF RAW MATERIAL UTILIZED FROM STOREROOM DURING 5 DAYS OF OPERATION
Paraffin wax: 150 (estimated amt. in drum initially) + 4 bags + 6 bags + 7 bags + 4 bags + 7 bags = 1270 kg Total unused candles weight = 58.275 kg Cost: 1211.725 X5.6 = Sh. 6785.66 ? Cotton spools: 6 + 9 + 8 + 2 + 9 = 34 spools Cost: 34 X 0.50 = Sh. 17
?
TOTAL COST OF RAW MATERIAL UTILIZED FROM STOREROOM DURING 5 DAYS OF OPERATION
Boxes used: 16 + 19 X 12 + 12 + 40 X 12 + 28 X 12 + 75 X 12 = 1972 boxes Cost: 1972 X 0.15 = Sh. 295.80 ? Cartons: 19 + 40 + 28 + 75 = 162 Cost: 162 X 0.60 = Sh. 97.20 ? Refilling gas: 55 X 3 = Sh. 165 ? Wages to workers: Sh. 7 X 15 X 5 = Sh. 690
?
TOTAL COST INCURRED
Sh. 6785.66 + Sh. 17 + Sh. 295.80 + Sh. 97.20 + Sh. 165 + Sh. 525 = Sh. 7915.66
Net deficit
Cost of raw materials – Earnings due to sales
Sh. 7915.66 – Sh. 5374.8 = Sh. 2540.86
CONCLUSION
The UCC has been successful in starting the operation plant once again ? Since the demand is brisk all candles are sold within a day or two of production ? Considering the cost of raw materials being used, UCC is not doing well in terms of profits ? Once the present store of raw materials is exhausted the cost of production will exceed the revenues
?
PROBLEM STATEMENT 2
Can Uhuru candles be profitable , given present cost levels and government prices?
Assumptions: • Weight of the wick used in a candle is negligible and does not contribute to the overall weight of the candle (45 gms) •The gas utilization is averaged on a daily basis •The production per day is 10 turns
PARAMETERS CONTRIBUTING TO THE PRODUCTION
COST
•Paraffin •Wick •Wages •Gas
wax
filling
•Cartons •Cardboards
TOTAL PRODUCTION COST (PER DAY)
Total number of candles produced everyday (10 turns): 5760
Parameter Paraffin wax Wages
Cost Sh. 5.6 / kg Sh. 7 per hour
Quantity used per day 259.2 kg 120 hrs 80 cartons 960 boxes
Productio n cost 1451.52 840
Gas filling
Cartons Boxes Total
Sh. 27.5 /day
60 cents 15 cents
27.5
48 144 2511.02
ANALYSIS
Government Subsidized price = Sh. 32.4 per carton Average selling price per candle = 45 cents Daily revenue = Sh. 2592
Daily profit = Revenue – Production cost 2592 – 2511.02 = Sh. 80.98
Result :- The Uhuru candle company is profitable according to the present subsidized government prices
THANK YOU
doc_240577540.pptx