Management Control Systems Class - Group 2Eka Avianti Ayuningtyas [11P2149]

M Farhan Lucky [11P2156]Meidi Indah Nurmiati [11P2158]

Lingga Wardhana [11P2155]

Profit & Loss Report Study Case in Nypro, Inc

Company

Nypro was a large custom injection molding company with sales of over $ 200 million in 1995.

Its strategy was to partner with major precision plastic users in the medical and computer/communication industries.

It offered modern, clean-room, high-quality, globally available plastic parts.

Nypro customers included Johnson & Johnson, Verbatim, 3M, H-P, Abbott Labs, and Gillette.

History and Performance

1970 1975 1980 1985 1994

Sales (in million $) 4 10 45 50 200

10

30

50

70

90

110

130

150

170

190

Total Sales in Nypro Inc

Gordon LanktonJoining Nypro in 1962 as general

manager and co-owner. Driven by an

entrepreneurial spirit and a global vision. Introduced

daily P&L report that used until 30 years.

Strategy

Develop the capability to make unique plastic pieces of high quality

Develop the molding process for large-scale operations

Build a worldwide network of custom injection molding operations

Partner and joint venture with employees and other companies

Develop clean-room manufacturing capability

The Organization

view by industry Nypro's network of 41 locations in 14 countries assures our global customers that Nypro is able to handle their most challenging projects, wherever and whenever we are needed.

The Process

Feeding raw plastic material into the barrel of molding machine.

The small beads of plastic material were melted upon entering the machines and then mixed with various plastic resins and injected to the mold.

Once properly cured (hardened and cooled), the proceess was repeated.

The Process

The Daily P & L Report

The Report served as the primary control data report for Nypro. By 11.00 am each day, each facility reported the key data for the previous three shifts.

The report had been computerized in the early 1970s, and it was developed into a daily profit and loss statement 15 years later.

This report give information to management to judge the performance of each production facility and for the general managers to evaluate their operations. (Page 164)

The Dilemma

Nypro’s corporate controller, Ted Lapres, worried about internal reporting systems. While there as certainly a wealth of reported information available.

Ted was worried that the rapid growth in information technology was making Nypro’s internal reporting system obsolete. He suspected they might even measure the wrong thing.

Questions & Our Discussion (1)

Do you think the daily P&L should be continued? Was it based on good cost accounting data and principles ?

P&L Report still continued. It will help to control manufacture's operational. For managerial position no need to review daily but it can be reviewed weekly or monthly. Since it need time to review every managerial decision, and it is not on daily basis.

P&L Report is not based on good cost accounting data and principles. Because this report only measure effective and efficiency based on operational and only report direct cost (machine utilization and labor cost). There is no data for indirect cost (advertising, salary for marketing, finance etc)

Questions & Our Discussion (2)

What other measures would you recommend ? Should they replace the daily P & L, or should they be additional ?

The other measurement that we recommend is job order costing. Since with job order costing we can know overhead cost for every job order.

Job order costing in not replacing daily P&L but company must have Job order costing besides P&L report

Questions & Our Discussion (3)

Do you see any opportunity to employ an ABC-type cost systems ?

Yes there is opportunity to employ an ABC-type cost systems. With ABC cost systems company can improve accuracy on measure cost for every product.

Below is criteria for company that use ABC cost systema. Company that use huge capital (many production machine)b. Company that have product diversificationc. Diversification product use same facilityd. Every product have same production process

Questions & Our Discussion (4)

Given the daily and monthly reports, was this enough control to manage this growth company ? Did they need more balance in their reporting system ?

No there is never enough, we need to grow up every day

Thank You