BERKSHIRE THREADED FASTENERS COMPANY

Berkshire Threaded Fasteners Company

Table of Contents

Executive Summary1

Analysis2

General matters (in no particular order):2

The Importance For The Company In Employing Brandon Cook2

The impact of cost allocation in determination of profitability3

Commission for Sales Staff Rather Than Fixed Salary4

Possible Areas To Investigate Cost Reduction5

Advice For The Bod Regarding The Company's Future Financial Viability5

Financial Matters6

Most Profitable Product Line In 20106

Product Line's Contribution To Fixed Costs In 20106

Breakeven Sales6

Financial Impact Of The Sales Mix Change In 20117

Financial Impact Of Employing The Sales Staff On A Commission Basis7

Financial Impact of Dropping the 300 Series8

Whether or not the company should reduce the quoted price of the 100 series8

References10

Executive Summary

This case is set in an “industrial commodities” firm in New England in 2010, as American dominance of world markets was slipping away. The case is about basic cost analysis issues. In February 2010, at the age of 33, Joe Magers became president of Berkshire Threaded Fasteners Company which had been started by his father. John Magers. Joe had only four years experience with the company. His father's untimely death in 2010 cut short their planned 10 year period of seasoning. Joe Magers knew that he had made several poor decisions during 1973 and that the morale of the organization had suffered, apparently through lack of confidence in him. When he received the income statement for 2010 (see Exhibit 1), the loss of over $70,000 during a good business year convinced him that he needed help. He hired Brandon Cook, age, as general manager in February, 2011. Cook would explain the reasons for his decisions to Magers in order to train him for successful leadership upon cook's retirement. Berkshire threaded Fasteners Company made three lines of metal fasteners (nuts and bolts), the 100 series, the 200 series, and the 300 series. The products were sold by the company's salaried sales force throughout New England. Each sales rep sold all three lines, but in varying proportions. Berkshire was one of eight companies with similar products. Several of its competitors were larger and manufactured a larger variety of products. The dominant company was Bosworth Machining Company, which operated a plant in Berkshire's market area.

Berkshire Threaded Fasteners Company

Introduction

Berkshire Threaded Fasteners Company is located in New England. It manufactures bolts and nuts (metal fasteners) of three different types, which are series of 100, 200, and 300. Berkshire Threaded Fasteners Company is operating in a competitive environment along with seven other companies with same product line in the market. Company sales its products in New England using its own salaried sales team. Berkshire Threaded Fasteners Company is suffering from bad conditions due to sudden death of its President, John Magers, in 2010. And John Magers's son become the President of Berkshire Threaded Fasteners Company with only four years experience which is not enough to run a manufacturing organization in such a competitive industry where there are already seven companies are operating with same product line. After that Berkshire Threaded Fasteners Company's president, Joe Magers, appointed Brandon Cook, a 56 years ...