I. II. III.

Negotiating the engagement Engagement planning Conducting a consulting assignment A. Problem identification and desired outcome The special order is for 500 boxes of 24 bottles each or a total of 12,000 bottles. Material costs will be: 48,000 6, 000 15, 120 12, 960 4, 800 18, 000

Chem 1: total required 12,000 bottles at 4ml Available chem. 5 that can be substituted for chem. 1 20,000 ml, salvage value Balance of chem. 1 required (48,000 ml 20,000ml) x 0.54 Chem. 2: 12, 000 bot x 3ml x P0.36 Chem. 3: 12, 000 bot x 2ml x P0.20 Chem. 4: 12, 000 bot x 5ml x (P0.40-P0.10)* Total material cost

56, 880 P123, 600

* The relevant cost of existing stocks is equal to their salvage value that will not be realized if the stocks are used in Clever order. B. Application of Suitable and Accurate Sources of Information and Data Gathering B1 The manufacturing cost data for Shamcon are as follows: Materials Chem 1 Chem 2 Chem 3 Quantity required per 1,00ml bottle 4 ml 3 ml 2 ml Current market price per ml 0.54 0.36 0.20

Direct labor; 2 hours per bottle @ 3 per hour Factory overhead: Variable overhead - 2.00 per direct labor hour Fixed overhead - 4.00 per direct labor hour B2 Clever company operator and owner of a chain of hotel asked Schundrel Hair Care Company to submit a bid for 500 boxes of Shamcon. Each box will contain 24 bottles. Per Clevers specifications, its order should be different in chemical composition from the regular Shamcon.

Clevers specification s can be met if an additional chemical, Chem 4 would be used. Schundrel Company has 60,000 ml of this chemical. Chem 4 was used by the company in one of its brand that it decided to eliminate. The remaining inventory chem. 4 was not sold or discarded because it does not deteriorate and the company has adequate space for its storage. Schrundrel Company can sell Chem 4 at the prevailing market price of 0.40 per ml less 0.10/ml selling and handling cost. Clevers order would require 5ml of Chem 4 per bottle. The company has a stock of Chem 5. This was used by Schundrel Hair Care for its manufacture of another product that is no longer being produced. Chem 5 which cannot be used in Shamcon, can be substituted for Chenm 1 on a one-for-one basis without affecting the quality of the Clever order. There is no problem about the supply of Chem 1. At present, the company has 20,000 ml of Chem 5 in its inventory, which has a salvage value of 6,000. The producton of the Clevers order would require the same direct labor hours per bottle as in the regular Shamcon. However, at present the company has only 20,000direct labor hours available. The Clever order can be produced if the workers would work overtime, although an overtime premium of 30% of the regular rate should be paid. Scoundrel Hair Care companys policy is to price new products at 130% of full manufacturing cost. C. Data analysis and diagnosis