Giberson Art Case Analysis

Glass cost per pound

$21.42 / 150 pounds (since 50 pounds of each production is “dirty glass” that “cannot be recycled as cullet” according to the notes) = $0.14 / pound

Adding to this cost is the gas to fire the ovens at $1,000 / month. As we covered he can make 150 pounds of usable class per week and there are 4 1/3 weeks per month.

$1,000 / 4.333 = $230.77 per 150 pounds or $1.54 per pound, plus $0.14 for materials = $1.68 / pound for variable material costs.

The reading says the office supplies, hand tools, manufacturing supplies and part time labor are all variable. They total $275 / month. If we assume 650 pounds of glass per month (150 * 4.33 weeks) we get an additional $0.42 / pound. This brings our total variable costs per pound to $2.10 ($1.68 + $0.42).

Stated Overhead is $915 - $275 (the portion deemed variable) = $640. This however only looks at cash items and for some reason ignores the cash truck payments. If we add the $205 (which there is roughly another 2 years left by my calculation) we get $845 cash expenses per month for overhead. In addition to that we need to add in depreciation expenses so that we will have funds for replacing equipment when it runs out. I have assumed $0 salvage value to err on the side of caution since I’m unfamiliar with the equipment.

Truck = $141.67 / month

Oven = $208.33 / month

Equipment / Tanks = $35.42 / month

Total