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RUNNING HEADING: BLAZE MANUFACTURING CASE ANALYSIS

Running heading: Blaze manufacturing case analysis

University of the People

MBA, CAPSTONE

BUS 5910, written assignment unit 4

July 12/2021
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Written assignment unit 4

Abstract

Discussing Blaze manufacturing (textile company) profitability in a new big order, through

comparison between the gross margin and contribution margin. On the other hand discussing the

accounting ethical contexts, and behavior. Discussing the problem, identifying causing

operations situations. Moreover, evaluation of the alternatives, recommendation of care plan and

relevance of the case plan to business. (Causseaux, W., & Caster, B, 2016).

Keywords; gross margin, contribution margin, profitability, ethics.

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Introduction

Discussion a case analysis for Blaze manufacturing, a small business with small operation

located in New York, struggling in a tough business with high competition, losing many

customers in years. The company does not produce through mass inventory, but as per request.

The company produce bedspreads, curtails and use fabrics as per customer request. The company

is going for big order in hard time and as per Wendy -assigned as company controller with high

accounting experience and credentials- her evaluation through the company reported non-

profitability of the order that was refused by the company employees. Wendy is in transient job,

and reports to company president and in same time to the consulting company. (Causseaux, W.,

& Caster, B, 2016).

Case facts:

Blaze manufacturing operations is simply a job shop, no mass inventory production to regular

retail shops.the production is based on standard items and as per customized individual customer

requests.

Blaze has one cutter and five sewers. The plants production ability is 80 bedspreads per day.

Direct materials for bedspreads are top fabric, batting, and backing. The thread is treated as a

variable overhead cost. The cutter and the sewer constitute direct labor. (Causseaux, W., &

Caster, B, 2016)

The major salaries are: Joe, 20 years president, taking fixed salary and bonus. Bill is sales clerk,

takes small salary and a 4% commission from his sales gross revenue. Wendy, and takes salary

from Blaze through Omega.

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Analysis:

Identification of problem: in financial terms;

Given the data collected by Wendy in her tour through the plant and industry cycle, the big order

for the Blaze manufacturing shows no profitability as per Wendy analysis depending on Gross

margin and even on contribution margin, that both analysis show that profits would not even

cover the costs. (Causseaux, W., & Caster, B, 2016).

Therefore, the case shows past administration decision taking with no actual clear accounting

analysis. Giving attention to costs in relation to profits.

Other aspects: ethical aspects, non-compliance with the IMA code of ethics, the president and

sales clerk showed no compliance to the reports with no proven justifications, and as well,

Wendy showed no action against such incompliance.

Diagnosis of cause:

The causes are multiple, first, causes that pushes decision makers to risk big order, including

high competition, tough business, and willingness to stay in business by any cost.

The hidden causes that might play a role, is the salary scheme that give the president bonus for

sale and the low salary of sales man made him dependent on the bonus from sale whether

profitable or not. These salaries systems might push them to accept the order despite its low

profitability. (Causseaux, W., & Caster, B, 2016)

Operations issues:

The other issue is the ambiguous mixed operations that made it hard to define the classifications

of costs and items in profitability analysis. Example; Bob’s work is divided between
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maintenance and quilting and no clear cost could be defined. As well, at full capacity there

would be a need for extra labor for quilting. (Causseaux, W., & Caster, B, 2016).

The other issue is the inability to fix the costs of the materials; the work is job shop, with

materials as per customer-customized request. (Causseaux, W., & Caster, B, 2016).

Possible alternatives prescription:

Contribution margin, as per CLAIRE (2021). Is the calculated revenue after substracting variable

costs used in production. This way we might be more efficient with deletion of variable costs but

some labors might lose their jobs and the result is still non-profitable.

Second issue is to increase price that means possible loss of order against competitors who pay

less wages.

Third, one is to update the operations to work more efficient, but that would increase production,

but that would increase Depreciation. (Touvila, 2021)

Forth alternative is to work on the fixed costs and sales commission, and that would affect

president and salesmen leading to loss loyalty and passion for work.

Plan of action:

Wendy should go for some offers and changes that would re assess administration attitude, like

change of costs, commissions, and bonus for the sake of overall profitability.

Arrange a meeting that collect all administration, with Omega and use her transient job as

company controller to put things together. To see different options like negotiation with the

order for using cheaper fabrics, out sourcing of some operations and evaluation of the net result

profitability and as well compliance.

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Wendy should follow the IMA Code of Ethics, which are (Competence, Confidentiality,

Integrity, and Credibility) and apply, and guide the leaders for them, accordingly seek

compliance .Eventually; the plan should include (accountingverse.n.d.)

Wendy; how to follow IMA standards and to protect herself as well from any breach or future

legal issue. Bills, Joe, and George have to be involved in IMA standard and compliance policy to

assure against any breach.

Conclusion and relevance to business:

The case rises important issue for the importance of IMA standards for the viability of business.

The company was liquidated within a year not because of the competition but as for ethical

incompliance. As well, the case shows the importance of proper operations management and

proper allocation of costs for the work sustainability and overall profitability.
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References:

- Accountingverse.com (N.D.), Code of Ethics for Management Accountants, from

(https://www.accountingverse.com/managerial-accounting/introduction/code-of-

ethics.html).

- Claire, (Apr 30, 2021) Gross Margin vs. Contribution Margin: What is the Difference?

From (https://www.investopedia.com/ask/answers/122314/what-difference-between-

gross-margin-and-contribution-margin.asp).

- Causseaux, W., & Caster, B. (2016). Blaze manufacturing: An ethical analysis. Journal of

Business Case Studies, 12(1), 13-18.

- Touvila, (Mar 13, 2021) Depreciation, from

(https://www.investopedia.com/terms/d/depreciation.asp).