Need help with case study 4 questions

1. Having reviewed the three options for reducing Adam's sanding time on the imminent opportunities. Which do you think is the best option? Provide calculations and reasoned explanations. Do you think this would also be the best option longer term?
2. How much would it cost to make a small cutting board? How much for a medium one? Use normal costing rather than relevant costing, if different, under all scenarios. For example, Adam does all the sanding or avails of one of the three options outlined in the case. Based on your answer and the price Suzie is willing to pay what would his profit margin be on each size of cutting board if he does all the work himself and what does this translate into on an hourly basis?
3. What strategy should Adam pursue - differentiation or cost?
4. Based on the information provided, your answers to the previous questions and any other analysis that you have undertaken, do you think that this will be a lucrative endeavor for Adam in retirement. Support your assertion with computations and so on.

Cutting Boards for Realtor A local realtor has approached Adam with a business proposition. Suzie heard about Adam through word of mouth when she admired a cutting board he made for a mutual friend. She would like him to make one-off/distinct cutting boards for her clients as a house-warming gift when they use her services to purchase a home. She estimates ISSN 1940-204X Adam, a woodworking enthusiast, lives with his family on a small farmette in rural Pennsylvania. He has been interested in woodworking since high school when his work was entered in the "Fresh Wood Student's Competition." Though he did not win the overall competition, his entry did receive the merit award for craftsmanship. Many years later, Adam now crafts wooden items to use in his own home and as gifts for his friends and extended family. Going forward, he hopes to supplement his income during retirement by making items to sell. BACKGROUND Over the last five years, Adam has invested in woodworking machines, tools, and supplies. These include a table saw ($2,495), a 16-inch planer ($1,950), and an 8-inch jointer ($750), the latter he bought secondhand on Craigslist. As these machines produce a significant amount of sawdust/fine-dust particles, Adam had to purchase a dust collection system and retrofitted this in his woodshop, which is a barn on his property. The cost of this system was approximately $900, excluding the time it took for him to install it. While there are many other tools and machines Adam would like to buy, he thinks the cost is prohibitive, unless he uses the items frequently. In addition to these "big ticket" items, Adam has acquired a myriad of smaller tools and supplies, such as chisels, handheld sanders, safety glasses, dust masks, sandpaper, screws, glue, and clamps. The wood Adam uses is mostly hardwoods that are native to Pennsylvania. He buys this locally for cash and his current timber "stack" costs in the region of $2,400.

that she would need 50 cutting boards per year and will pay between $35 and $45 depending on the size of the board (small or medium). Before committing to a long-term contract, Suzie and Adam have agreed that she will purchase an initial batch of 10 boards that will be ready in a month. Adam does his woodworking projects after work or on the weekends and does not have anyone to help him. He has all the materials on hand to make the batch of 10 boards, such as cut-off/scrap wood from other projects and glue, oil, and wax. He estimates that it will take three hours to make each board; the most labor-intensive element is sanding at roughly two hours. He is thinking of a number of alternatives for sanding: 1. Buy a drum sander, which would cost $1,250, and would cut his sanding time to one eighth. 2. Askasemi-retiredneighbortodothesanding,usingAdam'swoodshop,supplies,andsanders,and pay $10 per hourthe same amount the neighbor earns in a current part-time job. 3. Take the boards to a local Amish woodshop that is a 45-minute drive (35 miles away). He would pay to use their drum sander$50 per hour (in increments of one hour or part thereof)that an employee would operate. This price includes all supplies. The other hour to make the boards requires work on the table saw, planer, and jointer (both before and after gluing), clamping, and finishing the boards with food-grade oils and wax.

Headboard for a Friend A good friend of Adam's asked him about making a bespoke headboard for her aunt. She has perused his timber "stack" and picked out the slab that she would like him to use, even though he has not yet committed to making it. She chose one of the largest and more unique pieces of live-edge walnut purchased as a "lot" of 15 slabs that cost $1,200. Adam estimates that it would take 15 to 20 hours to make the headboard with approximately 75% of this spent on sanding it using the tools he currently owns. His sanding time, however, could be reduced considerably if he were to use one of the three options outlined previously. He knows that if he has to do all of the work himself on both projects, it is extremely unlikely he will complete them on time. Moreover, even if he could complete both projects, he does not have any idea how he would price the headboard. THE FUTURE Longer term, Adam is thinking about converting his barn into a brick-and-mortar shop, which would open up his woodwork projects to the public. The barn is big enough to convert the front portion of the building into a reception area that could display some of his best work. This would allow the back portion of the barn to be devoted to woodworking. Another potential opportunity came about when Adam's friend who lives in Philadelphia shared some images and a short video on social media. These featured Adam crafting cabinets and countertops for his own kitchen. After seeing the post, a real estate developer made inquiries and talked briefly with Adam about providing custom cabinets and/or butcher-block countertops within the development's luxury homes. While Adam likes the idea of opening his own brick-and-mortar shop, as it could allow him to be more creative, operating as a business-to-business (B2B) firm could potentially be more lucrative. SUMMARY Adam is in a quandary and needs professional help. He has reached out to your firm for assistance on how to cost his products to enable him to make informed decisions. He is also wondering if his woodworking endeavor could provide him with an income stream during retirement

Table 1. Additional Information from Adam Supplies for cutting boards Maple Cherry Walnut Glue - waterproof food grade Sandpaper - for current sanders Conditioning oil - food grade Wax - food grade Sandpaper - for drum sander Utilities Cost $4 per board foot * see below $6 per board foot $8 per board foot $30 per gallon $20 dollars for 50 disks $37.50 for an 8- ounce jar $37.50 for an 8- ounce jar $10 per drum Gas heating and electricity Projected amount required/usage, etc. Approximately 60% of each board will be maple Approximately 20% of each board will be cherry Approximately 20% of each board will be walnut Enough for 50 small/40 medium boards Three different grits required - one disk of each grit per two boards (small or medium) Enough for 75 small/60 medium boards Enough for 100 small/80 medium boards Three different drums required - each is a different grit - each drum is enough for 50 small or medium boards Rough estimate - $0.75 per board Note: when paying for wood you pay by the board foot. A board foot is 144 cubic inches and is equivalent to a board or slab that is 1-inch thick x 12 inches wide x 12 inches long One Board Foot However, when buying wood, boards can be any size. For example, one could be six feet long x 8 inches wide and 1 inch thick, and another board might be three feet long x 11 inches wide and 2 inches thick. Assume that Adam only buys boards that are 1 inch thick. Sizes of cutting boards Small = 14 inches long x 8 inches wide and 34 inch thick finished (starts out at 1 inch thick) Medium = 17 inches long x 10 inches wide and 34 inch thick finished (starts out at 1 inch thick) Additional waste (other than thickness) is approximately 20% due to, for example, cutting with a table saw and using a planer. Supplies for Headboard Wood: live edge walnut slab Conditioning oil: nonfood grade Wax: nonfood grade Sandpaper for current sanders Sandpaper for drum sander Utilities Other costs Average cost per mile for car Cost One of a lot of 15 that cost $1,200 $17.50 for an 8-ounce Jar $17.50 for an 8-ounce jar $20 dollars for 50 disks $10 per grit Gas heating and electricity All costs including gas Projected Amount Required/Usage, etc. One slab - a larger and more unique piece Enough for five headboards Enough for eight headboards Three different grits required - three disks of each grit Three different drums required - each is a different grit - each drum is enough for 10 headboards Rough estimate - $5 for headboard $0.46