Email Response: Rising Costs Analysis
Suppose you are an operations manager at a large production facility that produces paper products. You are reviewing data findings showing that the cost of producing your brand of paper towels has risen almost twenty percent over the past six months. These costs include raw materials, equipment, labor costs, and building and administration costs. The labor contract with workers was just renewed. The pressing machines had to be upgraded. Raw materials costs are fluctuating. The following costs for making the paper towels were identified:
Today's Production Costs: The costs from six months ago are included in an
Excel-Template-Assessment-5.xlsx
In row three (Today’s Production Costs), fill out the following Excel columns with the following information.
Softwood Costs - ten cents per paper towel roll.
Chemical Glue and Resin Costs - two cents per paper towel roll.
Equipment Costs - pressing machines - five cents per paper towel roll.
Labor Costs - twenty cents per paper towel roll.
Building and Administration Costs - twenty-five cents per paper towel roll.
Total Paper Towel Production Costs - sixty-two cents per paper towel roll. We sell the paper towels at $1.00 per roll.
You have been asked by your Chief Operating Office via email to address the following questions in an email response:
What is the profit margin per paper towel roll?
What are the production costs per paper towel produced?
What is the significance the cost increases from the past 6 months?
Why is it necessary to do a trend analysis for this situation?
What are some recommendations to counteract the new setup costs?
Email Response
Student Name
Institution
Course Name
Instructor
Date
Email Response
To: Chief Operating Office CC:
From: Mr. XXX, Operations Manager
Date: September 7th, 2023
Subject: Rising Costs Analysis
Good morning,
This email aims to examine data demonstrating a 20% increase in paper towel production costs over the last six months. Materials, labor, buildings, equipment, and administration all go into the price. Additionally, labor agreements have been extended, pressing equipment has been updated, and raw material prices have changed. I will respond to the questions in the section below.
* Profit Margin Per Paper Towel Roll
The price to manufacture one roll of paper towels is about 62 cents. However, they are available for purchase for $1 each roll. As a result, each roll of paper towels has a profit margin of 38 cents.
* Production Costs Per Paper Towel Produced
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