Ringo Rag Company

A.

Soal Kasus.

Ringo Rag Company The setting for this case is Columbus, Ohio in the early 1950s. The numbers in the case have not been updated because there is no way to do so without changing one or more of the interrelationships which make the case so useful from a pedagogical standpoint. In tackling the case, keep in mind that when it was “Current” an hourly wage of $1.10 was reasonable and a new Cadillac sold for $4.000. In terms of the managerial issues involved, it is still an excellent case for 2000s. The Ringo Rag Company purchases scrap cotton fabric which is then converted into handy cleaning rags in usable size, after it is cleaned and graded. Main customers for these rags are garages, service stations, factories, and machine shops. The company buys its rags from three sources: textile converters, commercial laundries, and junk dealers. The production process for the company is not complicated. First, rags purchased from junk dealers are washed and dried in special heavy duty machines. The cleaned rags and those purchased from laundries, which are already washed, move next to the grading department. Here, each rag is inspected and graded according to its absorption ability as either A, B, or C quality, with A as the best grade. Textile converters sell their “spoils” (rags) clean and already grade. Next, the rags are cut into squares of about 1 to 1,5 feet. A the same time, any attached item such as buttons, metal ornaments, or snaps are removed. Rags purchased from textile converters do not have anything attached to them. Prices of material which are too small for futher cutting or contain holes or are not usable for any either reason are burned. The cut rags are then packaged in 5, 10, 20, and 50 pound cartons. Selling prices are as follows (quoted FOB warehouse): Quality A B C

5 lb $.90 $.75 $.70

Carton Size 10 lb 20 lb $1.70 $3.20 $1.40 $2.60 $1.30 $2.40

50 lb $7.00 $5.50 $5.00

Raw material costs vary by source. Textile converters charge $6.00, $5.00, and $4,00 per cwt (hundred weight) for grade A, B, and C, respectively. Twenty percent of the weight purchased is lost as waste during the cutting process. This is referred to as “loss factor”. Last month, the following quantities were purchased from textile converters: Grade A Grade B Grade C

43,750 lb 25,000 lb 6,250 lb

Although each purchase was a little different, the company usually had to agree to take some quantity of C grade fabric when it bought A grade fabric. Laundries charge $3.00 per cwt. Past experience indicates a 33.33% loss factor. The yield ratio of material from the laundries is typically about ¼ grade A, ½ grade B, and ¼ grade C. Last month, Ringo purchased 60,000 pounds of material from laundries. The highest loss factor is incurred from material purchased from junk dealers, where it amounts to 50%. The junk dealers price for material is $1.00 per cwt. Last month, the company purchased 50,000 pounds from this source. This ungraded material usually yield about 1/5 grade A, 2/5 grade B, and 2/5 grade C rags, about half of the overall loss occurs in grading and about half in cutting. The company employs twenty-five women in 3 departments. Each of these women is paid $1.10 perhours. Last month’s time cards indicate that their time was spent as  follows: Grading Cutting Packing Total

1,000 hrs. 3,000 hrs. 600 hrs. 4,600 hrs.

Last month’s production and sales (cleaned, cut, and boxed) in pounds, was: Grade

Produced

Grade A Grade B Grade C Total

50,000 50,000 25,000 125,000

Sold Pounds $ 50,000 $7,750 50,000 $6,500 25,000 $3,125 125,000 $17,375

All sales are local, and orders are received by phone or mail. Last month’s production activities, sources of materials, prices, costs, and yields are representative of normal operations. Sales usually follow production very closely, with very little seasonal fluctuation. Two foremen are employed by the company, each paid $7,500 per year. Both are nephews of Mr. Ringo. One-fourth of their time is spent loading and unloading the washers and dryers. Another quarter of their time is spent supervising and checking the women. The two washer and dryer set owned by the company are depreciated over 5 years on a straight-line basis. Each set has a capacity of 100 pounds per load and can cycle about 16 loads during a working day. Expenses other than raw material and labor for a typical year are as follows:

Depreciation

$3,060

Natural Gas Electricity

$600 $480

Rent Detergent (for the washers) Bookkeeper, Secretary Gasoline and oil (for cars) Travel (Lodging and meals) Packing cartons

$3,200 $1,000 $4,100 $400 $6,000 $7,200

$760 washer and dryer; $300 cutting machines and tables; $2,000 for two cars. (a). Used for dryers ¾ is attributable to the washers and dryers, ¼ to cutting. Leased building (b).

About $.01 per mile Half for purchasing, half for selling 5 and 10 lb. Boxes at $.07 each, and 20 and 50 lb. Boxes at $.01 each.

Miscellaneous Expenses $1,200 Notes: (a) One car is used in selling, the other in purchasing. (b) The building is used as follows: ¼ for storing unprocessed rags (average about 1 month’s purchased), ¼ for storing boxed rags (about one month’s sales), ¼ for cutting, and 1/8 each for grading and cleaning. One room used as an office is not counted in the building usage.

The company is organized as a partnership between Mr. James Ringo, who acts as purchasing agent and president, and Mr. John Wall who handles all sales. Before forming their partnership 6 years ago, Mr. Ringo was purchasing manager for a paper mill which produced fine rag-content papers. Mr. Wall had been responsible for waste products sales for a large clothing manufacturer. This case was written as part of a student project to provide cost analysis and business advice for the company. Mr. Ringo said he agreed to the project because he had no formal cost accounting records at all. He said he and Mr. Wall ran the business pretty much on their intuition and they often wondered whether there might be more profitable ways to do things. For example, Mr. Wall had asked him once why he bothered to sort the junk rags at all since almost half of them are C grade anyway. He didn’t really have a good answer, and the question had led him to wonder whether he shouldn’t perhaps drop the junk altogether when the washer/dryers wor e out in a few years. He liked the idea of having several sources for raw material so he could shop around to keep his purchase prices low, but he couldn’t prove to himself whether he was buying the right mix. He and Mr. Wall built up a good set of steady customers over the years with good service and good quality at competitive prices. But they had no idea which products were most profitable. QUESTIONS:

You first task is to calculate “contribution margin” and “full cost profit” for each of the 5 different purchasing sources (Junk, Laundry, Tex A, Tex B, and Tex C). We suggest you start as follows: 1. Calculate average revenue per pound, by grade. 2. Calculate weighted average revenue per pound for each of the five purchasing sources.

3. Calculate raw material cost per pound sold, for each source. 4. Calculate direct labor cost per pound sold for: a. Grading. b. Cutting. (consider yields carefully). 5. Calculate packing cost (labor and material) per pound sold. 6. Calculate variable overhead per pound sold for the junk source. 7. Items 1 to 6 represent profit contribution by purchasing source. 8. Assign fixed overhead costs to each of the five purchasing sources: 9. Item 7 less item 8 represents full cost profit by source. Now, what does this have to do with the management issues? Specifically: 1. How close is the company to an optimal sourcing mix? 2. Can you calculate profitability by grade? Is this information useful? 3. What is your recommendation regarding selling all cleaned, cut and packaged junk rags as C grade, without sorting? 4. What other recommendations do you have for Mr. Ringo? 5. As an overall assessment, is this business in serious need of your help, or not? [Hint: can you estimate ROA (Return on Assets) for the business?]. B.

Profil Perusahaan. 1. 2. 3. 4.

Nama Perusahaan Tempat dan Waktu Jenis Perusahaan Aktivitas Perusahaan

: : : :

5.

Customers

:

6.

Suppliers

:

7.

Mgr. Pembelian dan Presiden Perusahaan

:

8.

Mgr. Penjualan

:

Ringo Rag Company Columbus , Ohio pada awal 1950-an Manufactured Perusahaan membeli scrap (sisa) kain katun yang kemudian diubah menjadi kain pembersih berguna dalam ukuran yang dapat digunakan Garasi, stasiun layanan, pabrik, dan toko-toko mesin Konverter tekstil, binatu komersial, dan dealer sampah Mr. James Ringo Pengalaman Kerja: manajer pembelian untuk pabrik kertas yang diproduksi baik kertas kain konten. Mr. John Wall Pengalaman Kerja: pernah bertanggung jawab atas produk-produk limbah penjualan untuk produsen pakaian besar.

C.

Proses Produksi.

Proses produksi bagi perusahaan tidak rumit. Pertama, kain yang dibeli dari dealer sampah dicuci dan dikeringkan dalam mesin cuci heavy duty (tugas khusus yang berat). Kain bersih yang dibeli dari binatu, sudah dicuci , masuk ke departemen grading. Di sini , masing-masing kain diperiksa dan dinilai sesuai dengan kemampuan penyerapan baik sebagai kualitas A , B , atau C, dengan kualitas A sebagai kelas terbaik . Konverter Tekstil menjual kain mereka yang sudah bersih dan sudah dinilai kelasnya. Selanjutnya, kain dipotong menjadi kotak dari sekitar 1 sampai 1,5 meter. Pada saat yang sama , setiap item yang melekat seperti tombol , ornamen logam , atau terkunci dihapus . Kain yang dibeli dari konverter tekstil tidak punya apa-apa yang menyertainya.

D.

Harga Jual. Setelah kain dipotong-potong menjadi ukuran kotak sekitar 1 sampai 1,5 meter, kemudian dikemas dalam 5, 10, 20, dan 50 karton pound. Adapun Harga jual adalah sebagai berikut (dikutip FOB gudang ) : Quality A B C

E.

5 lb $.90 $.75 $.70

Carton Size 10 lb 20 lb $1.70 $3.20 $1.40 $2.60 $1.30 $2.40

50 lb $7.00 $5.50 $5.00

Biaya Bahan Baku. Biaya bahan baku bervariasi menurut sumbernya, yaitu sebagai berikut: 1. Konverter Tekstil membebankan biaya $6,00, $5,00, dan $4,00 per CWT (hundredweight atau sama dengan 100 kilogram) untuk kelas A , B , dan C. 2. Binatu membebankan biaya $3.00 per CWT. 3. Dealer Sampah membebankan biaya untuk bahan adalah $ 1,00 per CWT

F.

Faktor Kehilangan (Loss Factor). Dua puluh persen (20%) dari berat yang dibeli hilang sebagai limbah selama proses pemotongan . Hal ini disebut sebagai "faktor kehilangan (Loss factor)". Bulan lalu, jumlah yang dibeli dari konverter tekstil adalah sebagai berikut: Grade A Grade B Grade C

43,750 lb 25,000 lb 6,250 lb

Meskipun setiap pembelian sedikit berbeda, perusahaan biasanya harus setuju untuk mengambil beberapa kuantitas kain kelas C ketika membeli Sebuah kain kelas A.. Pengalaman masa lalu menunjukkan faktor loss 33,33%. Rasio hasil bahan dari binatu biasanya sekitar ¼ kelas A , kelas B ½, dan ¼ kelas C. Bulan lalu, Ringo dibeli £60.000 bahan dari binatu. Faktor kerugian tertinggi terjadi dari bahan yang dibeli dari dealer sampah , di mana sebesar 50% . Sampah dealer harga untuk bahan adalah $ 1,00 per CWT . Bulan lalu , perusahaan membeli £ 50.000 dari sumber ini . Bahan ini biasanya tidak ditingkatkan mutunya menghasilkan sekitar 1/5 grade A , 2/5 kelas B , dan 2/5 kain kelas C , sekitar setengah dari kerugian secara keseluruhan terjadi pada grading dan sekitar setengah dalam pemotongan . G.

Biaya Tenaga Kerja. Perusahaan ini mempekerjakan dua puluh lima perempuan di 3 departemen . Masing-masing wanita dibayar $ 1,10 per hours . Kartu waktu bulan lalu menunjukkan bahwa waktu mereka dihabiskan sebagai berikut :

Grading Cutting Packing Total

1,000 hrs. 3,000 hrs. 600 hrs. 4,600 hrs.

Dua mandor dipekerjakan oleh perusahaan , masing-masing dibayar $ 7.500 per tahun . Keduanya adalah keponakan dari Bapak Ringo . Seperempat dari waktu mereka dihabiskan bongkar muat mesin cuci dan pengering . Seperempat dari waktu mereka dihabiskan mengawasi dan memeriksa para wanita . H.

Produksi dan Penjualan. Produksi bulan lalu dan penjualan ( dibersihkan , dipotong , dan kotak ) dalam pound , adalah : Grade

Produced

Grade A Grade B Grade C Total

50,000 50,000 25,000 125,000

Sold Pounds $ 50,000 $7,750 50,000 $6,500 25,000 $3,125 125,000 $17,375

Semua penjualan bersifat lokal, dan pesanan yang diterima melalui telepon atau surat. Kegiatan produksi bulan lalu, sumber bahan, harga, biaya, dan hasil mewakili operasi normal. Penjualan biasanya mengikuti produksi yang sangat erat , dengan sangat sedikit fluktuasi musiman . I.

Biaya Overhead Pabrik. Kedua mesin cuci dan pengering set yang dimiliki oleh perusahaan disusutkan selama 5 tahun secara garis lurus . Setiap set memiliki kapasitas 100 pound per beban dan dapat siklus sekitar 16 beban selama hari kerja . Beban lain selain bahan baku dan tenaga kerja untuk satu tahun khas adalah sebagai berikut :

Depreciation

$3,060

Natural Gas Electricity

$600 $480

Rent Detergent (for the washers) Bookkeeper, Secretary Gasoline and oil (for cars) Travel (Lodging and meals) Packing cartons

$3,200 $1,000 $4,100 $400 $6,000 $7,200

Miscellaneous Expenses

$1,200

$760 washer and dryer; $300 cutting machines and tables; $2,000 for two cars. (a). Used for dryers ¾ is attributable to the washers and dryers, ¼ to cutting. Leased building (b).

About $.01 per mile Half for purchasing, half for selling 5 and 10 lb. Boxes at $.07 each, and 20 and 50 lb. Boxes at $.01 each.

Notes: (a) One car is used in selling, the other in purchasing. (b) The building is used as follows: ¼ for storing unprocessed rags (average about 1 month’s purchased), ¼ for storing boxed rags (about one month’s sales), ¼ for cutting, and 1/8 each for grading and cleaning. One room used as an office is not counted in the building usage. . J.

Question 1.

Diminta:

Hitung rata-rata pendapatan per pon , dengan kelas.

 Jawab:

Pon (bhs belanda) = Pound (Bhs Inggris); disingkat: lb, lbm) adalah satuan massa (Berat).

Grade Grade A Grade B Grade C K.

Revenue ($) (1) $7,750 $6,500 $3,125

Sold (lb) (2) 50,000 50,000 25,000

Rata2= $/lb (3=1/2) $.155/lb $.130/lb $.125/lb

Question 2.

Diminta:

Hitung pendapatan rata-rata tertimbang per pon untuk masing-masing lima sumber pembelian .

 Jawab:

Grade

Pembelian Kain Scrap (lb) (1)

Loss Factor (2)

Unit tersedia Dijual (lb) (3=1*2)

Rata2 Tertimbang (4)

Pendapatan ($)

43,750 60,000 50,000

1-20% 1/4*2/3 1/5*1/2

35,000 10,000 5,000 50,000

0.70 0.20 0.10 1.00

5,425 1,550 775 7,750

25,000 60,000 50,000

1-20% 1/2*2/3 2/5*1/2

20,000 20,000 10,000 50,000

0.40 0.40 0.20 1.00

2,600 2,600 1,300 6,500

6,250 60,000 50,000

1-20% 1/4*2/3 2/5*1/2

5,000 10,000 10,000 25,000

0.20 0.40 0.40 1.00

625 1,250 1,250 3,125

(5=4*Ʃ5)

Grade A

Konverter Tekstil-Tex A Binatu Dealer Sampah

Grade B

Konverter Tekstil-Tex B Binatu Dealer Sampah

Grade C

Konverter Tekstil-Tex C Binatu Dealer Sampah

Dealer Sampah

Binatu

(Junk Dealer)

(Laundries)

Tex A

Tex B

Tex C

Grade A Grade B

$775 $1,300

$1,550 $2,600

$5,425 $0

$0 $2,600

$0 $0

Grade C

$1,250

$1,250

$0

$0

$625

Total Revenue ($)

$3,325

$5,400

$5,425

$2,600

$625

Unit Sold (lb)

50,000

60,000

35,000

20,000

5,000

Average Revenue per Pound ($/lb)

$0.067

$0.090

$0.155

$0.130

$0.125

L.

Konverter Tekstil (Textile Converter)

Question 3.

Diminta:

Hitung biaya bahan baku per pon dijual , untuk setiap sumber .

 Jawab:

Binatu Dealer Sampah Konverter Tekstil-Tex A Konverter Tekstil-Tex B Konverter Tekstil-Tex C

Material Purchased (lb)

Loss

Unit

Factor

Loss (lb)

(1)

(2)

(3=1/2)

60,000 50,000 43,750 25,000 6,250

33.33% 50.00% 20.00% 20.00% 20.00%

20,000 25,000 8,750 5,000 1,250

Material Cost

Binatu Dealer Sampah Konverter Tekstil-Tex A Konverter Tekstil-Tex B Konverter Tekstil-Tex C

Material Cost

(per cwt)

Conversion cwt to lb (dibagi 100)

(1)

(2)

(3=1/2)

$3 $1 $6 $5 $4

100 100 100 100 100

$0.03 $0.01 $0.06 $0.05 $0.04

(per lb)

Binatu Dealer Sampah Konverter Tekstil-Tex A Konverter Tekstil-Tex B Konverter Tekstil-Tex C

Material Purchased (lb)

Unit Loss (lb)

Unit Sold (lb)

Material Cost per lb

Total Material Cost

Material cost per pound sold

(1)

(2)

(3=1+2)

(4)

(5=1*4)

(6=5/3)

60,000 50,000 43,750 25,000 6,250

20,000 25,000 8,750 5,000 1,250

40,000 25,000 35,000 20,000 5,000

$0.03 $0.01 $0.06 $0.05 $0.04

$1,800 $500 $2,625 $1,250 $250

$0.045 $0.020 $0.075 $0.063 $0.050

125,000

$6,425

M. Question 4. Diminta:

Menghitung biaya tenaga kerja langsung per pound dijual : a . Grading . b . Cutting . ( mempertimbangkan hasil hati-hati ) .

 Jawab:

Binatu Dealer Sampah

Binatu Dealer Sampah Konverter Tekstil-Tex A Konverter Tekstil-Tex B Konverter Tekstil-Tex C

N.

Grading Sold (lb)

Komposisi

Direct Labour (jam)

Cost per jam

Total Cost

Cost per lb

(1)

(2=Ʃ1/2)

(3)

(4)

(5=3*4)

(6=5/1)

40,000 25,000

0.62 0.38

620 380

1.1 1.1

682 418

0.01705 0.01672

65,000

1.00

1000

Cutting Sold (lb)

Komposisi

Direct Labour (jam)

Cost per jam

Total Cost

Cost per lb

(1)

(2=Ʃ1/2)

(3)

(4)

(5=3*4)

(6=5/1)

40,000 25,000 35,000 20,000 5,000

0.32 0.20 0.28 0.16 0.04

960 600 840 480 120

1056 660 924 528 132

0.0264 0.0264 0.0264 0.0264 0.0264

125,000

1.00

3000

1000

1.1 1.1 1.1 1.1 1.1

3300

Question 5.

Diminta:

Hitung biaya pengepakan ( tenaga kerja dan bahan ) per pon dijual .

 Jawab:

Binatu Dealer Sampah Konverter Tekstil-Tex A Konverter Tekstil-Tex B Konverter Tekstil-Tex C

Packing Cost Sold (lb)

Komposisi

Direct Labour (jam)

Cost per jam

Total Cost

Cost per lb

(1)

(2=Ʃ1/2)

(3)

(4)

(5=3*4)

(6=5/1)

40,000 25,000 35,000 20,000 5,000

0.32 0.20 0.28 0.16 0.04

192 120 168 96 24

211.2 132 184.8 105.6 26.4

0.00528 0.00528 0.00528 0.00528 0.00528

125,000

1.00

600

Binatu Dealer Sampah Konverter Tekstil-Tex A Konverter Tekstil-Tex B Konverter Tekstil-Tex C

O.

1.1 1.1 1.1 1.1 1.1

660

Boxes Cost Sold (lb)

Box yang dibutuhkan

Harga Box per unit

Total Cost

Cost per lb

(1)

(2)

(3)

(4=2*3)

(5=4/1)

40,000 25,000 35,000 20,000 5,000

800 500 700 400 100

0.1 0.1 0.1 0.1 0.1

80 50 70 40 10

125,000

2,500

250

Question 6.

Diminta:

 Jawab:

Hitung overhead variabel per pon dijual untuk sumber sampah .

0.002 0.002 0.002 0.002 0.002

P.

Question 7.

Diminta:

Item 1 sampai 6 merupakan kontribusi laba dengan membeli sumber.

 Jawab:

Q.

Dealer Sampah (Junk Dealer)

(Laundries)

Tex A

Tex B

Tex C

Binatu

Konverter Tekstil (Textile Converter)

Revenue Variable Cost: Raw Material Labour (Grading) Labour (Cutting) Labour (Packing) Labour (Boxes) Total Variable Cost

0.07

0.09

0.16

0.13

0.13

0.02000 0.01672 0.02640 0.00528 0.00200 0.07040

0.04500 0.01705 0.02640 0.00528 0.00200 0.09573

0.07500 0.00000 0.02640 0.00528 0.00200 0.10868

0.06300 0.00000 0.02640 0.00528 0.00200 0.09668

0.05000 0.00000 0.02640 0.00528 0.00200 0.08368

Contribution Margin

(0.00040)

(0.00573)

0.05132

0.03332

0.04632

Question 8.

Diminta:

Menetapkan biaya overhead tetap untuk masing-masing dari lima sumber pembelian.

 Jawab:

R.

Question 9.

Diminta:

Butir 7 less item 8 merupakan laba biaya penuh oleh sumber.

 Jawab:

S.

Management Issues 1.

Diminta: Jawab: T.

Management Issues 2.

Diminta: Jawab:

U.

Management Issues 3.

Diminta: Jawab:

V.

Management Issues 4.

Diminta: Jawab: W. Management Issues 5. Diminta: Jawab: