Case ID: 102030
Solution ID: 23571
Words: 1552
Price $ 75

Anagene Inc Case Solution

Case Solution

An business, openly exchanged biotech company has started production and purchasers of their core product--tubes that enable DNA samples to become examined on the microchip. In early quarters, sales take time and effort to forecast and the organization has experienced changing production volumes and unpredictable gross margins, that has upset the board of company directors. The finance staff looks into whether or not to adopt a brand new costing approach according to capacity. With considerable amounts of unused capacity, the choice of methods to use capacity costs is crucial towards the company's management and it is confirming strategy with experts.

Excel Calculations

Overhead Allocation Calculations             

Table B   Anagene, Inc. Cartridge Financials ($, except for volume and gross profit %)                      


Income Statement for Anagene Inc

Questions Covered

1. Describe Anagene’s competitive environment, including its industry, its specific customer base, its product / customer heterogeneity, and the major concerns facing Anagene.*

2. Considering your answer to item 1, is it likely that the existing cost system may adversely and significantly affect decisions to emphasize certain products or affect profit?   Why (a general answer is expected)?*

3. Using the Excel format on my.asu, complete the exercise for Youngstown.   What “lessons” can be taken from this exercise? Do the “lessons” relate to Anagene?   Give one example.*

4. What has caused the fluctuating margins for Anagene’s cartridges?

5. Should Kelly even be concerned with the assignment of overhead costs to cartridges and gross margins that include allocated overhead? Why not use variable contribution margin (selling price less variable costs, primarily materials) for management decision-making and reporting?

6. Refer to items 3 and items 4, what role does practical capacity, expected production, and actual production play in formulating an approach for assigning overhead? How are these matters useful to managers? Draw on text and readings for your answer.

7. What approach do you recommend that Daniel Yeltin adopt?   Explain.   For your recommended approach, what will be the cartridge product costs and margins?

8. Suppose sales in 2001 equal 26,000 unit, as in the budget constructed in January, and that actual manufacturing expenses turn out to equal budgeted expense.   Prepare an income statement for the year (just include the manufacturing expense for expense) that will help senior management and the board understand the economics of cartridge production in 2001.