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1. Overview/Facts
Polar sports, Inc. is into fashion skiwear
2. Industry Overview
The Ski apparel business is a seasonal
business,
it is highly competitive and very low product life.
North Face, Burton, Karbon, Spyder Active
Sports, Sports obermeyer, Parda and Giorgio are
the major player in the apparel market
As the Market is highly competitive, some
players have shifted their production to Asia and
Latin America.
Due to High competition in both designing and
pricing, there is a high rate of company failure
3. Problem Statement
Should the management consider to shift
4.Objective
Understanding and interpretation of financial
5. Alternative
To consider for Level production Method
To follow the Existing, Seasonal Production
scheduling Method
To consider both the methods
Criteria
Risk of profitability and Liquidity
Source of Sort term financing and risk
exhibits)
Seasonal Production
a)
b)
c)
a)
Pros:
Requires minimum short term
financing
Less risk
Less inventory holding
Cons:
Increases operating Cost
Level Production
Pros:
a) Reduces operating cost
Cons:
a) Requires more short term financing
b) High risk
c) High Inventory Holding.
Analysis
Net Savings From Level Production
Overtime wage premiums
480,000
600,000
1,080,000
147,923
16,140
300,000
615,937
209,418
Net savings
406,518
7. Suggestion
From the above analysis, it shows that the
flow
Solution:
1.
2.
3.
Net saving from level production $406518 /The difference in profit between two production Plans $
1553141 /- under Level Production & 1146623 under
Seasonal Production.
Level production reduces COGS from 66 % to 60 %
Solution:
Total Savings From Level Production
1. Overtime wage premiums 480,000
2. Other direct labor savings 600,000
3. Total savings before financial charges, carrying
costs, inventory losses, and taxes 1,080,000
Solution:
Yes, The net Income Justifies the Potential risk,
Can
Solution:
1.
2.