Lipman Bottle Company Case Study

Abstract

Lipman Bottle Company has to use a product-costing method to explore the severity of variable costs per unit, time-based fabrication, capacity of their operation and growth in the current market.  The competition in their current market has caused Lipman Bottle Company to barely break-even.  Lipman Bottle Company needs to avoid loss in the future.  Lipman Bottle Company would like to expand their current market and increase production.  The analysis I will do will be created from three printing differences on the smallest bottle and an average order of 10,000 bottles.  The operating costs will include the setup and operation of the machines for each type of variation, the recommended prices will be made from break-even projections and the company want to achieve a 30% profit.

Case Study 17.2 Lipman Bottle Company

Lipman Bottle Company distributes bottles and is located in Albany, New York.  Lipman Bottle company was founded in 1909.  The company earns their profits from printing.  The company is able to print 1 million bottles.  Lipman Bottle Company has 10 printing machings and 8 drying ovens.  There are two primary types of bottle printer’s simple designers and custom decorators.  Simple designers have a standard design and a set price list.  Custom decorators have special prices because they have difficult designs.  Robert Lipman is the company’s vice president and has set a goal to make a 30 percent profit margin.  The vice president would also like to expand the business to new areas.  Robert Lipman has asked for analysis of their current product line and what the current costs are so he will be able to make a projection to increase the company’s profits and suggest new prices.

Variable Costs

I have completed the variable costs for a thousand bottles for many combinations.  The table below shows the variable costs for the Albany area.  I have analyzed bottle sizes from 0 to 1 ounce and 17 to 32 ounces.  The prices range for the quantities of the number of bottles ordered from 5000 to 9999 and 100000 to 249999.  Variable cost analysis for Mr. Lipman to be able to set prices:  1000000 – 128332.80 – 300000 = 571667 for variable costs.  

Please see the table below:

        I have added the table below to show the variable costs for New York and New Jersey area.  This will include the cost for shipping but not freight.  Freight is defined as the products that are being moved by means of commercial gain (A, 2014).  Freight shipping is less expensive to both parties.  Both tables have analysis for bottle sizes from 0 to 32 ounces.  The prices range for the quantities of the number of bottles ordered within two data sets.

Please see table below:

30 Percent Profit Margin

Mr. Lipman has set a goal of earning a 30 percent profit margin.  The first table shows current status.  The company’s break-even point.  The second table shows Mr. Lipman with a 30% percent profit margin.  In these tables it shows that Round bottle 2 costs almost double of Round Bottle 1.  As the size of the bottle increases the cost increases but the bigger sized orders lower the costs.