Spark Publishing &Printing House Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Spark Publishing &Printing House Case Solution

A # 2

There are other options. The first option is to continue the usage of existing P&D department, and the second option is to outsource its work to FPP for a monthly payment of 75,000 Indian rupees. Based on the calculations available in question 3; it is a better choice for Spark to call off his plan of outsourcing the work and to run the existing operations of the P&D department.

A # 3

Using Relevant Cost Analysis for the identification of Relevant Cost,

Relevant Cost of Salaries and Wages

The total cost of Salaries and Wages is 288,000, based on the salaries of 3 employees, i.e. Manek, Heralal, and Manager Ashwin plus 3 employees (dismissed after outsourcing) and 2 professional workers. The entire cost is considered relevant and can also be used for outsourcing.

Relevant Cost of Materials and Supplies

The total cost of materials and supplies is 340,000, which is based on the two costs of remaining materials and material inventory. The entire cost is considered relevant. It can also be used for subcontracting.

Relevant Cost of Depreciation

Depreciation Cost is considered as a sunk cost. The total cost of depreciation is calculated at 150,000, where the cost is based on the depreciation of machinery and vehicles. The entire cost is irrelevant and cannot be used for subcontracting.

Allocated Overhead:

The cost of the allocated overhead is 115,000, but only 60,000 is the related cost, while the remaining cost is irrelevant.

Rent of Warehouse:

Warehouse’s rent is 48,000. This is irrelevant, but receiving 42,000 on rent from a publishing warehouse is related to savings. Renting at 36,000 is another relevant option.

Other Operating Cost:

The operating cost is 79,000. It only treats 64,000 worth of expenditures as relevant costs, while the remaining is considered as irrelevant.

If the P&D department runs this operation, it gets 755,000 as of the total cost. If the P&D department is subcontracted; the total cost obtained is 1,120,000. The cost is calculated based on monthly fees, wages and salaries, materials and supplies, depreciation, allocated GOH, warehouse rent and operating expenses. Please refer to this table for details.

A # 4

No, Sameer should cancel the proposal of the fine printing press because outsourcing involves high differential cash flow. The cash flow of outsourcing is 1,120,000 but the cash flow of the outgoing P&D department is 755,000. So, considering all the aforementioned facts; Spark is suggested to stick to the continuation of the P&D department’s operations for one year.

A # 5

Spark Publishing and Printing House should consider the following relevant qualitative factors:

First Qualitative factor is that all the employees would be fired if the Fine Printing Press’s offer is accepted.
The Second Qualitative Factor is if they accept the offer; Spark Publishing and Printing House must make sure that the quality &performance of the printing and distribution services is applied through the fine printing press.
The third Qualitative Factor is thatthe cost of outsourcing far exceeds than that of the P&D department.

Sameer should consider all these relevant factors before making any decision.

Recommendations

Spark publishers should cancel the proposal of Fine Printing Press, because the cost of outsourcing is higher than the costs incurred by the ongoing P&D department.Outsourcing may be a problem for Spark Publishing and Printing House, which might lead towards a decline in the brand image, the quality of printed materials and other related issues (supplier relations)........................

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Spark Publishing &Printing House Harvard Case Solution & Analysis