I need help with an assignment...

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Zen21Tao

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I am an MBA student. In my Managerial Accounting class where we have to pick a company and analyze it. As a gun lover I was able to talk my company into using Smith and Wesson (I would have rather used Sig, HK, or Kimber but the company has to be publically traded and file 10k). For the first part of this assignment we have to break down operating costs as far as we possibly can.

Example:
- Opertating facilities and machinery
- Labor (both seasonal and permanant)
- Office supplies
- Raw Steel
- rubber
- lead
- copper
- gun powder
- R&D
- Oil

Where I think knowlegable THRers can help is coming up with many more. We also have estimate how much each cost (I don't expect anyone to know this). Any help you guys can provide me would be GREATLY appreciated.
 
Not sure I follow. Are you simply trying to identify the operating cost categories? I'd pull the 10-Q and start from there. But unless you can get a copy of the company's internal statements, your breakdown of the major categories will be somewhat speculative, and it will be next to impossible to discover actual costs for each category.

Make sure you review S&W's product line, and don't include things that they don't sell. For example, does S&W manufacture their own ammunition (I don't think so); so you won't want gun powder on your list of material costs. Again, start with the 10-Q.
 
Not sure I follow. Are you simply trying to identify the operating cost categories? I'd pull the 10-Q and start from there. But unless you can get a copy of the company's internal statements, your breakdown of the major categories will be somewhat speculative, and it will be next to impossible to discover actual costs for each category.

Make sure you review S&W's product line, and don't include things that they don't sell. For example, does S&W manufacture their own ammunition (I don't think so); so you won't want gun powder on your list of material costs. Again, start with the 10-Q.
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Yes, speculation of what items make up the Cost Of Goods Sold and Operating Costs categories is the very point of the assignment. We are not to discover actual cost (as you say they would be nearly impossible to find if you are outside the company) we are to estimate what these costs COULD be. Once we develope the cost we have to devide them up as fixed, varied or mixed and then use various mathmatical methods to each of them.

I know that S&W doesn't sell their own ammo but one would reason that they must load their own, as well as use other commerial brands, for the testing and evaluation of their firearms and perhaps even for their R&D programs. S&W would pass this cost along to the comsumer by including it their operating costs.

A company will have many many items that they include as "operating costs", I want us to find as many as we possibly can.
 
You should be able to access something like Yahoo and look at the SEC filings for a company. Shouldn't those expenditures be included in quarterly filings? Maybe not broken down cent by cent, but there should be enough info for you to get a rough idea.
 
You should be able to access something like Yahoo and look at the SEC filings for a company. Shouldn't those expenditures be included in quarterly filings? Maybe not broken down cent by cent, but there should be enough info for you to get a rough idea.
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I am very familure with locating SEC filings. 10ks and 10Qs do not break down the individual components that go into calculating the figure filed as an operating cost. This is the very difference between financial accounting and managerial accounting. Financial accounting deals with bottom line figures presented to share holders and the public in the 10K and 10Qs. Managerial accounting, on the other hand, deals with an internal analysis of the individual costs to produce an sell a product. A managerial accountant will have access to info that people outside the company don't have. That is why we are speculating what costs could be rather than actually digging up what the actual costs are.

Again, what we are assigned to do is think of as many possible costs that could possible go into the development and sales of S&W's products. We will be starting with the figures listed in 10Qs and 10K then partitioning these figures down as much as possible between the individual itemized costs we could came up with.

All I am asking is for other ideas of what COULD possibly be included as something S&W has to pay for to devlop and sell their product. For example, if S&W makes their own firearms grips they have to buy the raw rubber and wood.
 
Well, seems like the direct material costs would be pretty simple, the largest part being steel and whatever other exotic metals or alloys S&W may use. Do they do any casting, like Ruger does? And any idea what intermediate parts they buy rather than make? Do they manufacture their own springs, or make them? You're probably right regarding some elements of plastic (sight inserts), rubber (grips), and the like. Also lubricant.

Major costs are probably related to the manufacturing process. Milling machines, CNC stuff, and the like. Twist drills and machine tools would be a significant cost, as would solvents, lubricants, etc.

Then you have all the S&W branded stuff. Plastic shipping boxes, foam rubber packing materials, little plastic chamber plugs for shipping semi-autos. Then the clothing (hats, t-shirts, jackets, etc.). Does S&W make knife and bicycle products, or just license the name?

I'll bet the largest cost, probably even more than direct material costs, is labor.

Then you have marketing and distribution costs: trade shows, display ads, web site development ...

Oh boy, isn't managerial accounting fun?
 
OK. I was thinking of the filings my employer does each quarter. You're right, they don't break down 'line item' costs, but I guess working for the company, I find it easy to correlate those reports with the internal reports we get. Was just thinking out loud. Good luck!
 
Repairs & Maintenace on the manufacturing equipment would normally be shown as COGS. Also depreciation on the manufacturing equipment would be COGS, although a non-cash expense...
 
Thanks everyone with the suggests you have made. I am off to meet with my group to discuss complete of the assigment as it is due Nov. 7th. The suggestions you have made should turn out to be very helpful.
 
I highly doubt Smith & Wesson uses much raw copper, lead, brass, primers, or gunpowder... since they don't manufacture ammo, I'll betcha dollars to doughnuts that they buy pre-manufactured rounds from an ammunition manufacturer for R&D, testing, etc....
 
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