Portal Corporation Harvard Case Solution & Analysis

PORTAL CORPORATION

Portal Corporation manufactures the laser printer, and have to laser printer production plant in Utah in which Ogden is the newly established plant and Sandy is the oldest production plant. Both plants are working 240 days in a year under normal capacity usage of plants. The company wanted to produce the laser printer using the maximum capacity of the each plant. The maximum annual capacity of each plant is around 200 working days.

Problem Identification:

Portal faces the problem that if a company wanted to utilize the maximum capacity for the upcoming year than it would raise the variable manufacturing cost of each plant in which for Ogden plant the additional unit would be cost $5 additionally as overtime to produce per unit and for Sandy the additional variable per unit cost would raise $10 that in result lead towards reducing the operating revenue of each plant.To propose the solution of reducing these additional variable costs, further analysis has been made on the basis of the following questions.

Identify the contribution margin of an individual plant at normal capacity?

What is the operating income per unit of each capacity?

How excess capacity can be utilized to produce additional units of 120,000?

Evaluation:

The evaluation has been made on the basis of the above questions and the proposed solution have been identified for solving the problem.

Currently Portal Corporation is using the normal capacity for the manufacturing of the laser printer in both the production facility. The selling price of the laser printer is the same which is $320. Under normal capacity of Ogden plant contribution margin is $210 which is 66% of the selling price and for Sandy production facility the contribution margin is $195 and in percentage it is around 61% of the selling price. Fixed cost per unit of Ogden plant is $70 and for Sandy is $39 that generates per unit operating income of around $140 for Ogden and $156 for the Sandy production facility.

Portal wanted to generate more profit using the excess capacity of each production facility to produce 120,000 units in upcoming years and by producing more it would generate more profit. To produce both production facility’s excess capacity the calculations have been made for identifying the per unit breakeven point. For Ogden the breakeven points in units is around $20,000 per unit and for the Sandy production facility it is around $9,600 per unit.

Projections:

Further projections were made to produce the maximum capacity of both production facilities. To produce the 120,000 units, Ogden would be utilizing its normal production capacity, which is around 60,000 units as it was using its full utilization capacity under normal production of 60,000 units. To produce the annual capacity of 120,000 units, Sandy plant is required to produce an additional 12,000 units to reach its full capacity and before this excess capacity Sandy was producing 48,000 units under normal production................

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