Questions;

Assume you are creating a Lego kit to resell. Also, assume that you are presenting this project to the Vice President of Product

and Marketing Development and the Vice President of Sales who requires a two page – back and front – deliverable. This

deliverable is worth 60% and the actual creation is worth 40%. Your deliverable should be a handout which will allow the VPs to

determine if the company wishes to invest in the product and sell the item in the company.

When determining the cost of the product, assume the following costs for the Lego bricks in determining the cost of your

creation:

Costing: Direct Materials Cost: Lego Plates: 5 cents each (these are the flat Lego pieces); Lego Bricks: 8 cents each; Lego Special

Pieces: 10 cents each (if the piece is not a plate or a normal Lego brick, it should be classified as a special piece

Direct Labor Cost: Direct labor costs are recorded at 60% of your total direct materials cost.

Manufacturing Overhead Cost: Manufacturing overhead costs are recorded at 45% of your direct labor cost.

Required: You should create a two-page deliverable in a professional manner that provides information about your

creation. Your deliverable will be judged on creativity and the informational content of the report You will be judged on the information you present about the creation you have built. At a minimum, your report should contain the following:

• A unique name for your creation along with the selling price of your Lego Kit. Make sure you use creativity in choosing the name of your creation. Explain why you have chosen this name.

• Clearly state the selling price you have set for your creation. Comment on the reasonableness of the selling price of your creation and explain how you calculated the selling price.

• A discussion of the types of costs associated with manufacturing the Legos for your creation. This does not include the dollar amount of costs, just the TYPES/DESCRIPTION of costs. Think through the manufacturing process and include all of the types of costs that you can identify that would be used in this manufacturing process – minimum ten different, unique types of costs. (Think about obvious types of items used in any manufacturing process.)

You MUST INCLUDE a flowchart depicting the manufacturing process WITH EACH STEP LABELED CLEARLY.

Instead of a flowchart, you could use another interesting approach for presenting the information in a diagram form.

Diagram in as much detail as you can, the process for your Lego creation from start to finish (finish being when you sell the product.

• Include in your written deliverable at least one picture of your creation in addition to the picture on the cover sheet.

• For distance students, Lego projects will be completed using the Lego Digital Designer 4.3 on Lego.com or using your own Legos. The Lego project will be an individual project for distance students. On campus students may not use the Lego Digital Designer. Distance students should include ONE ADDITIONAL PAGE THAT HAS ONLY A PICTURE OF THEIR CREATION ON IT AND THE NAME OF THE CREATION.

• Summarize all costs of production in a Production Cost Sheet format. You should show number of pieces in detail and show totals for all parts of the production process. Include your computation of selling price in this section as well. Make sure that this section is clearly presented.

 Answers:

Introduction:

The name of the creation will be advertised, marketed and sold in the market using the name “Let’s be innovative while playing” as the word Lego has been derived from the Danish words “Leg godt” which means play well. Now, in case we use the term innovative for the product, it helps to attract the customers considering 3 aspects: it gives time to people to enjoy during work, it brings in the innovation within the minds to transform Lego into some structure and it is cheap (Chaudron, 2018).

Costing of the product:

The product costing structure has been shown below. All the direct costs including the direct material costs, the direct labour costs and the manufacturing overhead costs have been considered as per given in the proposal. All the 3 products have been considered, where if the piece is not a plate or normal Lego brick, then the same will be considered a special piece and thus, will be charged higher (Belton, 2017). Selling, distribution and general administration expenses which will be incurred on selling and marketing of the product has been considered to be 15% of the overall production costs.

Pricing of the product:

The price of each of the products has been fixed such that it is 12% higher than the overall cost of sales, which will yield 10.71% net margin to the company on all the products. The pricing has been done to keep the rates competitive as the average price of the Lego plates in the market stands at 20-25 cents (Erik & Jan, 2017). These prices will give an edge to the company and in case less pieces are being sold, the company would still be able to make profits selling the most basic model i.e., Lego plates (Bygstad & Iden, 2017).

Types of the products:

The major costs which will be included in the product cost can be categorized into the fixed and variable costs. Within that, several components will be there which has been mentioned below:

1. Direct Material costs
2. Direct Labour costs
3. Production or manufacturing overhead costs/
4. Research and development costs.
5. Packing cost (Choy, 2018)
6. Forwarding cost including freight and logistics costs.
7. Advertisement and publicity costs.
8. Rental costs of the warehouse
9. Administration costs of the office personnel
10. IT costs including computer expenses which are in the nature of fixed costs (Jefferson, 2017).

References

Belton, P. (2017). Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat International ltd. Retrieved from https://www.routledge.com/Competitive-Strategy-Creating-and-Sustaining-Superior-Performance/Belton/p/book/9781912128808

Bygstad, B., & Iden, J. (2017, April). A Governance Model for Managing Lightweight IT. World Conference on Information Systems and Technologies, 384-393. Retrieved from https://link.springer.com/chapter/10.1007/978-3-319-56535-4_39

Chaudron, R. (2018). Bank’s interest rate risk and profitability in a prolonged environment of low interest rates. Journal of Banking and Finance, 89, 94-104.

Choy, Y. K. (2018). Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview Analysis. Ecological Economics, 145. Retrieved from https://doi.org/10.1016/j.ecolecon.2017.08.005

Erik, H., & Jan, B. (2017). Supply chain management and activity-based costing: Current status and directions for the future. International Journal of Physical Distribution & Logistics Management, 47(8), 712-735.

Jefferson, M. (2017). Energy, Complexity and Wealth Maximization, R. Ayres. Springer, Switzerland . Technological Forecasting and Social Change, 353-354.