Professional Documents
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Market Analysis
Genome Market
Anagene
Workstations were either sold outright or leased/rented (no title transfer); the
use of the latter was accelerated since it would mean the companys
workstations would be adopted faster; could lead to a strong base for
cartridge sales
Projected cartridge sales for 2001 was 50,000
However, forecast was revised to 26,000 in the January 2001 board meeting
Lead times and time required for analysis of difficult assays took longer than
expected
Customers were also reusing cartridges rather than buying new ones
Total cartridge volume projected for 2002 -95,000
Manufacturing
Parts of the workstation (loader and reader) required expertise and vast
resources; Anagene decided to outsource the production of these parts;
contract with Hitachi; Anagene performed final product testing but
management expects Hitachi to take over this step in the long-run
Anagene built own manufacturing facility for production of cartridges
Management expected a large market for cartridges; based in Kellys
experience in the diagnostics market, consumables (in this case, the
cartridges) usually had a larger share of the market compared to instruments;
gross margins were also comparably higher; however, he noted that being a
new technology in a new market, margins still cannot be accurately
forecasted
Monthly production volume experienced significant variations
Anna Puleski controller and director of finance; hired Daniel Yeltin (CPA) to be
manager of financial analysis
Yeltin developed Anagenes cost system when they started producing
cartridges for sale
Standard costs calculated once a year
1. Budgeted VC per unit was estimated
2. For OH, each machine and equipment was assigned to one of the
manufacturing steps so depreciation may be calculated for each step
3. For support departments (shipping, purchasing) depreciation was
estimated rather than calculated
Plant level OH were allocated to cartridge manufacturing, instrument
manufacturing, and R&D based on budgeted production volumes; OH cost per
unit is obtained
Standard cost per cartridge calculated by adding per unit material, scrap, and
labor costs
Other costs associated with sale of cartridges unit cost of royalties,
estimated return expenses
Standard costs used for financial reporting and assessing product cost and
profitability
Aggregate and infrequently updated standard costs were not so useful for
production cost control
Anagene 2001
Meeting
Decreasing cartridge margins raised questions regarding the companys longterm profitability
Fluctuating monthly production volume made it difficult for board members
and analysts to understand short-term profitability
Yeltin was tasked by Kelly to investigate the practical capacity concept