Brunswick Plastics Company is a leading plastics manufacturer with operations in the United States, Europe, and Asia. The company produces a variety of plastic products, including injection molded parts, extruded parts, and thermoformed parts. Brunswick Plastics has a long history of innovation and cost-effective manufacturing practices.
In recent years, Brunswick Plastics has faced increased competition from Chinese manufacturers. In order to remain competitive, Brunswick Plastics has had to lower its prices and reduce its costs. The company has been able to do this by automating its production processes and introducing new technologies.
Brunswick Plastics is a publicly traded company listed on the New York Stock Exchange. The company’s shares are held by a number of institutional investors, including Fidelity Investments, Vanguard Group, and BlackRock.
Brunswick Plastics is a well-established company with a strong financial position. The company has a good track record of profitability and is expected to continue to be profitable in the future. Brunswick Plastics is a good investment for investors seeking exposure to the plastics industry.
The production required a lot of labor hours, and since they weren’t at capacity, they were finishing slightly above breakeven. Brunswick Plastics’ Division Manager, Michael Smith, was alerted to a possibility for his firm and had to decide whether or not to pursue it. Mr. Smith was informed that the company would produce 150,000 milk crates as part of a project.
This project’s machinery and labor requirements were known, as well as the cost of materials. The new project would require an investment in new machinery of $600,000. This machinery would have a four-year life with no salvage value and would be depreciated by straight-line to zero.
The project requires an increase in Net Working Capital of $30,000. The required return on this project is 14 percent. Brunswick Plastics currently has a tax rate of 40 percent. The price per crate is $4.50 and variable costs are expected to be $2.10 per crate. There is no change in the selling price or variable cost with this new project. Fixed costs will increase by $210,000.
The analysis of Brunswick Plastics Company must include an evaluation of the costs and economics of the company in order to make a decision on whether or not to venture into the new opportunity. This includes an examination of the fixed and variable costs, as well as the price per crate and the required return on investment. Additionally, the taxes paid by Brunswick Plastics must be considered in the analysis.
The total cost of this project would be $840,000 which includes the cost of the new machinery, the increase in net working capital, and the fixed cost increase. The project would have a cash flow of $105,000 per year. The payback period for this project would be 8 years.
The internal rate of return (IRR) for this project is 16 percent. The present value of the cash flows for this project is $722,000. The NPV for this project is $82,000.
Based on the information above, it would be beneficial for Brunswick Plastics Company to venture into this new opportunity. The company would see an increase in cash flow and profitability by pursuing this project. Additionally, the IRR and NPV are both positive, indicating that this is a financially sound investment.
He can place a bid on the project. Mr. Smith, on the other hand, is unsure of his data and requires answers to obtain a more precise idea of the production costs. The following are his known expenses: Production Labor $0.14 Loading Labor 0.02 Crate Materials 1.71 Stamp Materials 0.04 TOTAL $1.91 per unit Stamping Machine $5,000 one-time cost Mr Smith must make a crucial pricing decision in order to have an advantage in the bidding process.
What is the bid price per unit that maximizes Brunswick’s economic profit? What is the target market price of the widget?
The cost to produce an additional unit of the widget is $1.91. The target market price of the widget is unknown, but Mr. Smith must bid competitively in order to win the project. Therefore, the bid price per unit that maximizes Brunswick’s economic profit is $1.91.
Mr. Smith has precise inquiries that must be answered, and he will have a firm grasp on the scenario so that he can make a decision on whether to submit the bid and at what price. If the offer is too expensive, it will most likely be rejected, depriving the business of the chance to reach capacity and earn more money. However, if the bid is too low, it would result in damage for the organization. Throughout this case study, we will address Mr. Smith’s queries.
Cost: What is the marginal cost of production for Brunswick Plastics?
The marginal cost of production for Brunswick Plastics is $0.75 per unit. The company’s total fixed costs are $600,000, while its variable costs are $0.50 per unit. This means that the company’s marginal cost is equal to its variable costs plus its fixed costs divided by the number of units produced. In this case, the company’s marginal cost would be $0.75 per unit.
Economics: What pricing strategy would you recommend to Brunswick Plastics?
There are a few different pricing strategies that Brunswick Plastics could use. First, the company could choose to price its products at a lower price in order to increase sales and market share. This could be a good option if the company is trying to enter a new market or expand its customer base.
However, this pricing strategy could also lead to lower profits. Another option would be to price its products at a higher price in order to maximize profits. This could be a good option if the company is trying to increase its profits or if it has a very loyal customer base. However, this pricing strategy could also lead to lower sales.
Company: What are some potential risks and challenges that Brunswick Plastics may face?
Brunswick Plastics may face several potential risks and challenges in the future. First, the company may have difficulty increasing its production capacity. The company may also face competition from other businesses that produce similar products. Additionally, Brunswick Plastics may have to deal with fluctuations in the prices of raw materials. Finally, the company may have to deal with changes in consumer demand.