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Colorscope, Inc.

Harvard Business School Case #910-410


197040
Case Software #XLS-812

Copyright 2010 President and Fellows of Harvard College. No part of this product may be
reproduced, stored in a retrieval system or transmitted in any form or by any meanselectronic,
mechanical, photocopying, recording or otherwisewithout the permission of Harvard Business
School.

Exhibit 1 Price trend of color separations to scan, assemble, proof and output
printer specified film for a hypothetical direct mail catalog page with one image

Price/Page of work ($):

1991

1992

1993

1994

1995

Colorscope

1,100

900

750

650

600

400

425

450

475

500

Service-Bureau

2 Service -Bureaus such as Kinko's and Alphagraphics typically do jobs that are cheaper, and
involve fewer and/or smaller pages.

Exhibit 4 Time/Cost Breakdown for the Catalog Producer


Direct mail catalogers constituted over 90% of Colorscope's customers. To produce an
average project run, in this example, 1 million copies of a 52-page catalog, costs would
break down as follows:

Design (3 weeks),
writing copy,
producing layouts,
gaining
management
approvals.

Photography (2
weeks), 200300 images,
studio and
location shots.

Prepress (2
weeks), 2
rounds of
proofs to
the project
manager.

Printing (3 days),
cutting, binding,
addressing for
national distribution

Distribution (23 weeks),


second class
bulk rate post.

$10,000

$50,000

$30,000

$1,300,000

$120,000

Exhibit 5 Top American Pre-press Competitors (does not include printers that have integrated forward)
Company

WACE USA
Applied Graphics Technologies
Black Dot Group
Schawk, Inc.

Sales Employees
(M$US)
200
130
109
104

1,850
1,060
900
729

American Color

76

840

Intaglio Vivi-Color
Enteron Group

60
56

450
400

Kwik International
Color Associates
TSI Graphics
Blanks Color Imaging
Kreber Graphics, Inc.

41
37
27
24
22

110
390
313
230
165

Facilities Primary Business


(sites)
20
13
12
12

magazines, direct mail, packaging


magazines, direct mail, packaging
mags, dir. mail, packaging, books
mags, dir. mail, packaging, agency

16 mags, dir. mail, pkg, agncy, newsp


13 packaging
4 mags, dir. mail, pkg, agncy, books
1
1
4
1
2

packaging, agency
packaging, publishing, catalogs
mags, dir. mail, packaging, books
mags, dir. mail, packaging, agency
mags, dir. mail, pkg, agncy, retail

Exhibit 8: Jobs completed in June 1996*


Job #
61001
61002
61003
61101
61102
61201
61202
61203
61204
61301
61401
61402
61403
61404
61405
61501
61502
61601
61602
61603
61701
61702
61801
61901
61902
62001
Total

Customer # Pages
10
16
10
16
10
32
11
16
11
16
12
16
12
32
12
32
12
32
13
128
14
16
14
16
14
16
14
16
14
16
15
16
15
16
16
32
16
4
16
4
17
16
17
16
18
4
19
4
19
16
20
1
545

*All figures are disguised

Revenue
$9,600
9,600
23,000
12,000
11,000
11,000
23,000
22,000
20,000
50,000
7,800
8,000
8,000
9,000
9,800
11,000
11,000
20,000
2,000
1,400
8,000
10,000
4,000
2,000
12,000
0
$315,200

$ 600.00
$ 600.00
$ 718.75
$ 750.00
$ 687.50
$ 687.50
$ 718.75
$ 687.50
$ 625.00
$ 390.63
$ 487.50
$ 500.00
$ 500.00
$ 562.50
$ 612.50
$ 687.50
$ 687.50
$ 625.00
$ 500.00
$ 350.00
$ 500.00
$ 625.00
$ 1,000.00
$ 500.00
$ 750.00
$
$ 578.35

23,400

40

585

Exhibit 9: Hours clocked at different workstations in June 1996*

JOB#

Job
Preparation

61001
61002
61003
61101
61102
61201
61202
61203
61204
61301
61401
61402
61403
61404
61405
61501
61502
61601
61602
61603
61701
61702
61801
61901
61902
62001
Idle Time
Capacity

4
3
7
4
4
4
7
6
6
15
5
4
4
4
4
4
4
7
2
2
4
4
1
2
5
1
117
43

Applied
Cost

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
160
$
1000 $

295.29
221.47
516.75
295.29
295.29
295.29
516.75
442.93
442.93
1,107.33
369.11
295.29
295.29
295.29
295.29
295.29
295.29
516.75
147.64
147.64
295.29
295.29
73.82
147.64
369.11
73.82
8,637.14
2,150.00
8,000.00
50.00

Scanning
32
24
40
16
16
16
32
34
30
130
14
19
20
22
20
21
20
26
5
5
20
20
5
5
19
1
612
28
640
1000

Applied Cost
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

3,212.30
2,409.22
4,015.37
1,606.15
1,606.15
1,606.15
3,212.30
3,413.06
3,011.53
13,049.95
1,405.38
1,907.30
2,007.68
2,208.45
2,007.68
2,108.07
2,007.68
2,609.99
501.92
501.92
2,007.68
2,007.68
501.92
501.92
1,907.30
100.38
30,600.00
1,400.00
32,000.00
50.00

Hours clocked in different work stations include rework hours given in Exhibit 10.
* All figures are disguised

Assembly
42
38
75
30
28
32
58
64
58
250
32
32
34
36
36
39
40
60
10
11
39
41
11
12
42
2
1152
128
1280
4000

Applied Cost
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

3,034.89
2,745.85
5,419.44
2,167.78
2,023.26
2,312.30
4,191.03
4,624.59
4,191.03
18,064.81
2,312.30
2,312.30
2,456.81
2,601.33
2,601.33
2,818.11
2,890.37
4,335.55
722.59
794.85
2,818.11
2,962.63
794.85
867.11
3,034.89
144.52
57,600.00
6,400.00
64,000.00
50.00

Output
8
8
16
4
4
4
8
8
8
32
4
8
4
4
4
4
8
8
1
2
4
4
2
1
4
1
163
37
200
2000

Applied Cost
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

1,185.57
1,185.57
2,371.15
592.79
592.79
592.79
1,185.57
1,185.57
1,185.57
4,742.30
592.79
1,185.57
592.79
592.79
592.79
592.79
1,185.57
1,185.57
148.20
296.39
592.79
592.79
296.39
148.20
592.79
148.20
8,150.00
1,850.00
10,000.00
50.00

Quality
Control
7
8
8
4
4
6
5
6
8
30
4
7
3
5
4
4
7
9
1
1
3
5
1
1
5
1
147
13
160
500

Applied Cost
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

Total

604.25
93
690.57
81
690.57
146
345.29
58
345.29
56
517.93
62
431.61
110
517.93
118
690.57
110
2,589.65
457
345.29
59
604.25
70
258.97
65
431.61
71
345.29
68
345.29
72
604.25
79
776.90
110
86.32
19
86.32
21
258.97
70
431.61
74
86.32
20
86.32
21
431.61
75
86.32
6
10,106.25
2191
893.75
249
$ 11,000.00 2440
68.75

Cost +
Material

Selling Price

$ 16,432.30 $
9,600.00
$ 11,852.68 $
9,600.00
$ 17,513.28 $
23,000.00
$
6,807.28 $
12,000.00
$
6,362.77 $
11,000.00
$
6,824.45 $
11,000.00
$ 12,837.26 $
23,000.00
$ 13,584.09 $
22,000.00
$ 12,721.64 $
20,000.00
$ 53,554.03 $
50,000.00
$
6,824.86 $
7,800.00
$
9,404.71 $
8,000.00
$
9,511.54 $
8,000.00
$
8,229.47 $
9,000.00
$
7,842.38 $
9,800.00
$
8,359.54 $
11,000.00
$ 12,083.17 $
11,000.00
$ 12,724.76 $
20,000.00
$
2,206.68 $
2,000.00
$
2,827.13 $
1,400.00
$
8,072.83 $
8,000.00
$
8,789.99 $
10,000.00
$
4,353.31 $
4,000.00
$
4,451.19 $
2,000.00
$
8,535.69 $
12,000.00
$
753.24 $
$ 115,093.39 $ 315,200.00
$ 12,693.75 Idle Time
$ 125,000.00 Profit

CM

CM%

$ (6,832.30)
-71.17%
$ (2,252.68)
-23.47%
$
5,486.72
23.86%
$
5,192.72
43.27%
$
4,637.23
42.16%
$
4,175.55
37.96%
$ 10,162.74
44.19%
$
8,415.91
38.25%
$
7,278.36
36.39%
$ (3,554.03)
-7.11%
$
975.14
12.50%
$ (1,404.71)
-17.56%
$ (1,511.54)
-18.89%
$
770.53
8.56%
$
1,957.62
19.98%
$
2,640.46
24.00%
$ (1,083.17)
-9.85%
$
7,275.24
36.38%
$
(206.68)
-10.33%
$ (1,427.13) -101.94%
$
(72.83)
-0.91%
$
1,210.01
12.10%
$
(353.31)
-8.83%
$ (2,451.19) -122.56%
$
3,464.31
28.87%
$
(753.24)
$ 41,739.73
13.24%
$ (21,840.00)
$ 19,899.73

-4132 $ (2,700.30)
-1153 $ (1,099.68)

-2554 $ (1,000.03)

417 $ (1,500.17)

647 $ (1,000.31)
-1451 $ (1,000.19)

$ (8,300.68)

Exhibit 10: Rework hours*


Rework due to change in specifications by customer

JOB#
61001
61002
61301
61502
61801
61901
Total

Job Preparation
0
0
2
1
0
1
4

$
$
$
$
$
$

147.64
73.82
73.82

Scanning
16
8
5
4
1
1
35

$ 1,606.15
$ 803.07
$ 501.92
$ 401.54
$ 100.38
$ 100.38

Scanning
3
9
10
3
25

$ 301.15
$ 903.46
$ 1,003.84
$ 301.15

Assembly
10
6
10
8
3
4
41

$
$
$
$
$
$

722.59
433.56
722.59
578.07
216.78
289.04

$
$
$
$

289.04
1,156.15
1,011.63
216.78

Quality Control initiated rework of house errors

JOB#
61301
61402
61403
61603
Total

Job Preparation
1
0
0
1
2

* All figures are disguised

$
$
$
$

73.82
73.82

Assembly
4
16
14
3
37

fications by customer

Output
4
$592.79
4
$592.79
2
$296.39
1
$148.20
1
$148.20
0
$
12

Output
1
2
2
1
6

$148.20
$296.39
$296.39
$148.20

Quality
Control
2
3
2
0
0
0
7

Quality
Control
1
2
1
0
4

Cost +
Total Material
$5,794
$ 172.64
32
$3,188
$ 258.97
21
$2,841
$ 172.64
21
$2,702
$
14
$1,465
$
5
$1,463
$
6
$17,454
99

$ 86.32
$ 172.64
$ 86.32
$
-

Total
10
29
27
8
74

$1,899
$3,529
$3,398
$1,240
$10,065

Exhibit 11: Selected Financial Information for June 1996

Description
Wages
Depreciation
Rent
Others
Total Overhead
Floor Space in sq.
ft.

Job
Preparation
$8,000
$500
$
2,000
$ 1,311.48
$11,811
1000

Scanning
Assembly
Output
$32,000
$64,000
$10,000
$25,000
$10,000
$14,000
$
2,000 $
8,000 $
4,000
$ 5,245.90 $10,491.80 $ 1,639.34
$64,245.90 $92,491.80 $29,639.34
1000
4000
2000

Quality
Control
Idle
$11,000
$500
$
1,000 13000
$ 1,311.48
$13,811.48
500 6,500

* All figures are disguised

Labor Hours
Idle
Actual

OH Applied

160
640
1280
200
160
43
28
128
37
13
117
612
1152
163
147
$
73.82 $
100.38 $
72.26 $
148.20 $
86.32
73.13%
95.63%
90.00%
81.50%
91.88%
$ 8,637.14 $ 61,435.14 $ 83,242.62 $ 24,156.07 $ 12,689.29

Underapplied by

$ 3,174.33

$ 2,810.76

$ 9,249.18

$ 5,483.28

$ 1,122.18

Total
$125,000.00
$ 50,000.00
$ 30,000.00
$ 20,000.00
$225,000.00
$ 15,000.00

92.21311
15000

2440

92.21

Exhibit 12: Materials expense in June 1996*

Job#
61001
61002
61003
61101
61102
61201
61202
61203
61204
61301
61401
61402
61403
61404
61405
61501
61502
61601
61602
61603
61701
61702
61801
61901
61902
62001
Total

Total Materials
expense3
$5,400
3,500
4,500
1,800
1,500
1,500
3,300
3,400
3,200
13,000
1,800
3,100
3,900
2,100
2000
2200
3,600
3,300
600
1,000
2100
2,500
1,600
1,700
2,200
200
$75,000

*All figures are disguised


3

Includes materials for rework.

Customer initiated
rework
Correction of house error
$2,700
1,100

1,000

$1,000
1,000
1,000

1,500

500

1,000
1,000

$8,300

$3,500

$8,100
$4,600
$4,500
$1,800
$1,500
$1,500
$3,300
$3,400
$3,200
$14,000
$1,800
$3,100
$3,900
$2,100
$2,000
$2,200
$5,100
$3,300
$600
$1,000
$2,100
$2,500
$2,600
$2,700
$2,200
$200