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Athens Glass Works

Group 2:
Courtney Doyle, Toni Hornsby, Klair Julian,
Kessha Sutherland, Olusegun Samuel Eseyin
Dallas Baptist University

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Athens Glass Works
Objectives:
The objectives of Athens Glass Workss case are to recover a percentage of their lost
market share, fund expansion and modernization through profits from the nonglare glass product,
and satisfy senior management.
Assumptions:
-AGW sales will not fall below 150,000 sq. ft.
-competitors will not move their price from $2.15
-any actions taken for the nonglare glass product will have no repercussions on other
products
-(any information we make up for accounting purposes)
Decision Problem:
The decision problem initially appears to be Do we return the price to $2.15 or leave it
at $2.36? However, once deliberation over alternatives began, the group decided this problem
statement was limiting, and developed additional decision problem statements. The final decision
problem the group decided to use was What price do we set for the product?
Alternatives (need 3 to 5):
The first alternative the group considered was choosing a price between $2.15 and $2.36.
While Alexander, Specialty Glass Divisions controller, was concerned the nonglare glass
product would show profit loss at a price of $2.15, Matthews, the product manager of the
nonglare glass, believed the $2.15 price was necessary to regain market share. The $2.36 price
did appear to correlate with the loss of market share, so the group determined the price of the
nonglare glass product should not be greater than $2.36 or less than $2.15. A price of $2.25 was
arbitrarily chosen as a median value. At $2.25, the nonglare glass product would only show a
loss if production volume was 150,000 square feet, and the loss would be $0.08 per square foot.
Matthews had determined market share would not fall below 150,000 due to Athens Glass
Workss quality of product and customer service, even if the price remained at $2.36. At a lower
price of $2.25, Athens Glass Works could potentially regain customers, preventing sales from
reaching as low as 150,000 and removing the risk of producing at a loss. Regardless of the
chosen selling price between $2.15 and $2.36, Athens Glass Works will bring in a greater profit
with a higher selling price. Based on the given exhibits developed by Matthews and Alexander,
losing market share because of the higher price will still bring in more profit than selling at or
below cost. At a sales and production volume of 150,000 square feet, Athens Glass Works will
earn $0.03 per square foot with a selling price of $2.36, but will lose $0.18 with a selling price of
$2.15 (see Appendix B). Even if Athens Glass Workss market share moved back up to sales of
275,000 (as Matthews desires) because the selling price moved back down to $2.15, Athens
Glass Works would still lose $0.05 per square foot. If Athens Glass Works operated within its
profitable range for the nonglare glass product, profits would only be $0.01 per square foot.
-Reevaluate accounting procedure

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-Make a deal with a supplier/customer/competing company
-Learn/understand how competitors are maintaining prices/costs
-produce only the volume with the least cost, $2.14; may result in extra inventory or
inability to meet demand
Conclusions and Recommendations:
Additionally, Athens Glass Workss policy of adhering to a price change for at least ninety days
means the company will be able to change the price relatively quickly if the new price does not
work well for the company.
Also Consider: How do we get the customers back? What will it take to make the customers
happy again? (incentives, discounts, better service)
Additional Information:
-the price increase was, in part, an attempt to fund a long-term expansion and
modernization program; other pricing decisions had been made for the same
reason
-the price increase was, in part, a response to increased corporate pressure to improve
margins
-Should selling and admin costs be calculated as a percent of manufacturing? Should
general OH be calculated as a percent of labor? Shouldnt material/shipping cost
be variable?
-new price will be adhered to for at least 90 days
-the nonglare glass has a process with specialized equipment usable only in the
production of nonglare glass
-business outlook for nonglare glass and flat-glass products in general has been flat for
several years
-AGW known for fast reliable service, exceptionally high-quality nonglare glass; has its
own fleet of delivery vehicles (delivery times well managed and shipping charges
low), sales staff known for helpful, courteous service and customer orientation

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Appendices
Appendix A

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Appendix B

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Appendix C

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The estimated market share for the fourth quarter of 1993 is based on Matthews prediction of
Athens Glass Workss sales of 275,000 square feet (if Athens Glass Works returns their selling
price to $2.15) and a total regional volume of 920,000 square feet.