Kuzama Ltd. was founded in 2014, by Kahneer, a bike enthusiast. Having been frustrated by the poor quality of bicycle racks he decided to design and build his own bike rack. A particular irritant in his experience was the lack of a built-in locking system on the bike racks. He spent $33,000 developing and registering a patent for a unique locking system. He also paid a designer Ms. Bouwcur, $45,000 to design the locking system. The bike rack carries up to two bikes and was an immediate success. This bike rack sells for $333 per unit. Based on his success, Kahneer expanded, with the addition to his product line, of a new rack called “Triple” in 2016. The Triple can carry three bikes and is sold for $400 per unit. To keep costs down, he purposely did not add in the special lock on the Triple, saving Kuzama Ltd. $29 on every Triple produced. Kuzama Ltd. does not sell directly to the end user, but rather sells to 36 retailers; 15 retailers that specialize in selling racks for automobiles and 21 retailers that are actually bicycle shops. The number of retailers has grown by 20% annually over the past two years.

With his focus on the Triple, the owner hired a manager, Leeshah, in 2016 to run the original product line, which became known as the “Double”. Leeshah, in addition to her salary of $140,000, negotiated a signing bonus of $44,000 and a commission per unit of $5. Leeshah has hired two administrative assistants who each receive a salary of $80,000 per year. In 2017 Kuzama Ltd. hired a new manager, Zie, for the Triple product line at a salary of $145,000 per year. Zie inadvertently overheard Leeshah explaining, on a phone conversation in the parking lot, what she was going to spend her commission on. Zie was confused and grew agitated that Kuzama Ltd. was not transparent with compensation details. She also wondered if it was legal or ethical to provide one person commissions and not everyone. General Head Office administration totals $550,000 annually; this total does not include any product line, commission or factory costs. Part of the $550,000, in fact 5% of it, represents a substantial recycling program that the company is a participant in. This annual membership grants them the right to use a special certificate/label each year. In 2016, the firm spent $66,000 on a new logo featuring the locking system. Online reviews indicate strong support for the certificate and the superb locking system.
Production The factory production capacity per month is #1,000 units. This #1,000 units of capacity applies to any combination of the two products, essentially meaning that the factory production efforts are equal between the Triple and the Double. Kuzama Ltd. closes production for November and December. Management performs planning and administrative work during November and then in December the entire company is closed. The #1,000 units per month is a factory limitation, but each product line has their own specific equipment leased annually which pertains to their respective product lines. The factory cost is an annual lease of $300,000 and can be renewed in November each year. There are currently no other suitable factories available in the region. The Double product line has dedicated production equipment with a lease cost of $190,000 per year and a capacity of #13,000 units per year based on 12 months of production. The Triple has two pieces of identical production equipment leased at $56,000 each, with each piece of equipment able to produce #4,000 Triples per year, based on twelve months of operations. All leases are 12 months in duration. Triple maintains, on average, 20 units in inventory throughout the year.
Costs Accounting records indicate that the material cost per unit for the Double and the Triple is identical at $100 per unit. The labor cost to make a Double is $35 whereas the Triple labor cost is actually lower at $30 per unit. This labor is non-skilled, requires nominal training and is abundant in Cascadia. There is no inflation and Kuzama Ltd. has a line of credit at an interest rate of 10% per annum. The factory overhead costs for the past two years are in the table below. Factory overhead includes the production equipment for each product line, the factory lease, factory maintenance, and factory electricity.
Recent Conversations and Developments Kahneer recently met up with a university friend named Ahnstun who suggested that Kuzama Ltd. introduce a bike rack to accommodate 4 bikes named the “Quad”. The contribution margin on a Quad is estimated to be $230 and direct fixed costs per year would be $345,000. These direct fixed costs would enable Kuzama Ltd. to produce #5,000 units per year. Kahneer and Ahnstun thought about it and estimated that they could sell #2,000 units per year. They estimated that demand for their Quad would then grow by 20% per year. Management believes that the Quad would use factory production capacity at the same rate per unit as the Double rack. Kahneer likes the idea of the Quad and especially the healthy contribution margin, but wonders if they should instead start building racks for kayaks and paddleboards. He thinks that the contribution margin on kayak racks would be much higher than that of bike racks. At a recent trade show, a European car manufacturer announced a new partnership with a bike rack company and a lock company to create bike racks which are specifically designed for electric cars. They are anticipating entering the Cascadia market in 2020. Zie’s cousin is the CEO of the European car manufacturer and, knowing Zie’s zeal for this product, her cousin keeps Zie systematically updated on this emerging partnership. Recently there has been a series of emails and voice messages from retailers complaining that the shipments were not on time and that the product mix was incorrect. Several complaints indicate that shipments around the holiday season, at the end of the year, are particularly problematic. There has been no response by management, because each manager feels that the owner should deal with these complaints. Kahneer mused, “it seems like we should sell online and if we could save $10 of the margin that the retailers are making off of us that would be more than $80,000 of easy money each year.” It is January 2019 and the owner, Kahneer, would like you, the consultant, to provide an analysis resulting in the creation of three key, actionable recommendations.
According to the text,Zie is unsatisfied with her salary,as I am doing a issue analyization and recommendation report,how can i proved that it's needed with a case methodology.

Answer rating: 100% (QA)

To establish the case for Zies dissatisfaction with her salary you can follow a structured approach using a case methodology Heres a stepbystep guide ... View the full answer