Mr. Tanaka

 In addition to buying materials, the manufacturer needs to pay the employees.

 How much will the worker earn in an 8- hour day?  How much will the worker earn in a 5-day work week?  How much will the worker earn in a 52- week year?

 How many cell phone holders can he or she make in an 8-hour work day?  Using a the daily pay rate, you calculated, what would the labor cost be to make each cell phone holder?

 The cost to rent the factory, pay the utility bills, and other business maintenance costs are grouped together as the cost of overhead.  A simple way to estimate manufacturing overhead on a single product is to determine a plant’s overhead during a year and divide by the total number of products produced in that time.

 can produce 100,000 cell phone holders per year, and the overhead costs are $200,000. What is the overhead cost per cell phone holder?

The sum of…  Material cost,  Labor cost, and  Overhead.

 If you sell the product for the same amount it costs you to produce it, you won’t make a profit. If you mark up the price too much, the customer might look elsewhere.

 Production Cost + (Manufacture’s Markup x Production Cost) = Wholesale Cost

a) …$100, and you want to make a 10% profit. What would be the wholesale cost? 15%? 20%, 25%? b) …$62, and you want to make a 10% profit. What would be the wholesale cost? 15%? 20%, 25%?

 Factories do not sell their products one at a time. Instead, they sell full shipping boxes, called cases, to stores that will sell the products to individual customers.  Assume the holders will be tightly packed in the shipping box with cardboard packaging to protect them.

 When a store buys a product, it pays a “wholesale price.” Then the store sells the items at a higher “retail price” that is usually twice the whole sale price.

 Wholesale Cost per Box + Shipping and Handling = Total Store Cost Problem: Let’s say 100 products, which costs $5 each, fit in a box. It costs $25 for shipping and handling. What is the Total Store Costs?

 Store Cost of Each Item = Total Store Cost / Items per box Problem: What is the Store Cost of each item from the previous situation? 

 = Store Cost of Each Item + (Store’s Cost Markup x Store Cost of Each Item)  Usually it TWICE as much as wholesale price. Problem: What would be the retail price if the store wants to make 10% markup?

 Competition often means that the manufacturer has to find a way to reduce the cost.  But, reducing the cost of an item almost always involves trade-offs.  Trade-off is a design choice in which one benefit is chosen at the expense of another.

 Using a cheaper material will make it cheaper, but…  Continue and complete the sentence.  Write about an example of trade-off. Is the manufacturer making a good choice? Why or why not?