Santa Rosa JewelryTarget Profit AssignmentThere

Santa Rosa Jewelry
Target Profit Assignment
There are some hints in the notes page of each slide .
To get there, go to view tab, Notes page, you can see what is
written in the notes sections, while the case facts and
requirements are in the main PP slide area.

Tiffany Nadeau is your client!

Write a report that is appropriate for her
(based on what you learn about her)

Make it a great week!

Your assignment

You agreed to analyze her business operations
and to advise her how to reach her goal of
earning $120,000 per year, after taxes. After
some calculation and some thought, you
conclude that Tiffany has to increase her
revenues, perhaps by achieving greater
volume, or perhaps by raising her selling price.

Evaluate what kind of business

Tiffany Nadeau established and ran a small
workshop that manufactured unique, high
quality jewelry. She marketed these creations
to up scale gift shops across the United States
in batches of 20 assorted items, for which she
charged $2,880 per batch. In turn, the gift
shops sold the jewelry at prices averaging
eight times what they paid for the jewelry.

A bit about your client

Business was brisk, and Tiffany could sell all that she
produced. But she found herself earning very little
money, and after paying her 45% U S and California
income tax, she found herself with almost no money
to live on. That led Tiffany to you, as her consultant.
She complained to you that she worked very hard, 50
weeks a year, but ended up broke and frustrated.
Tiffany said that house prices were very expensive in
Santa Rosa, CA and that she hoped to purchase a home
and have enough left for a nice vacation and moderate
lifestyle. She noted that she would be satisfied to
make $120,000 a year, after taxes.

Costs per unit: which unit?

Tiffany employed 11 people. 10 earned $30 per
hour and worked producing jewelry. Joseph was
paid $20 per hour for his unskilled labor. Jewelry
production varied between a low of 14 and a high
of 26 batches per week, and averaged 1,000
batches per year. Each batch cost $130 (excluding
wages) to pack and ship, with Joseph doing all
the packing and shipping. It takes Joseph 1 hour
to pack and ship one batch. Joseph also does
other chores, such as sweeping, vacuuming and
cleaning, and he averages 30 hours per week of
employment with Tiffany's workshop, for the 50
weeks per year that he works for Tiffany.

Tiffany’s marketing trips

Tiffany spends 10 weeks a year touring the U.S.
and attending trade shows in order to sell her
jewelry. Her travel, hotel, show fees, and food
costs were $4,200 each week. Workshop rent
and utilities cost her an average of $7,500 per
month. Tiffany works 40 weeks a year at making
jewelry, While at the shop, she works 50 hours
per week designing, setting up and
manufacturing as needed to get orders out on
time. She takes 2 weeks of vacation each year.

Fixed and Variable manufacturing costs

The cost of raw materials varied depending on
the price of gold and silver. Tiffany spends
about $1,900 per batch on raw materials.
Production workers spend 20 hours form each
batch. Tiffany’s time is in addition. They earn
$30 per hour. And work 40 hours per week.
Advertising runs $38,000 per year. Insurance
costs $1,500 per month. Rent and Utilities are
$7,500.