BUNGA CLAY POTS – FINDING OUT THE WHY OF GOOD TIMES

The analysis presented in the accompanying Excel sheet corresponds to one business period of
BUNGA CLAY POTS. BUNGA has been a well-established brand in the market for interior
decoration since 1988. Traditionally, people consider them to offer good designs for each season,
as well as good quality of their pottery.

BUNGA managers and owners, who are second generation, are proud of their standing in the
market, which happens to be quite competitive. In particular, they claim to follow manufacturing
processes that meet exacting standards. Those standards have been carefully protected from the
prying eyes of competitors, and have been kept the same for one generation.

The business period that just ended was somewhat unusual, due to the fact that one of the minor
competitors lost most of its production capacity, due to a fire in their production plant. This
accident caused a halt in production for over two months. Then reorganization, and regulation
issues that lead to litigation, kept the plant closed for an additional month. One consequence was
that most of the day laborers, who usually make 80% of the work force, had to seek where else to
go, at least for the time been.

In BUNGA, the overhead costs consist of all salaries in the main office plus those of the plant
manager plus any needed production quality comptrollers.