Axeon N
Case Study
Axeon N. V.
ME2028 Behavioral Management Control
•
•
•
•
•
B7
Jianan Chen
Xiaofei Ren
Suyu Zhang
Xiao Zhou
880805-A307
861106-A261
870401-A280
871029-A926
Question1
-What do you feel about the initial analysis?
-Was there, in your opinion, anything wrong with it?
We do think there is something inappropriate with the initial analysis. • First thing is the over optimistic scenario which they have based on.
• Secondly, since Ian Wallingford want to borrow money for the investment, hence it is critical to analysis the effect of the debt service payment on net present value. Meanwhile the expect return should be higher. All this may decrease the profitability.
• Thirdly in the analysis of Estimated end-of –life value of UK assets, the salvage value of plant is 1400000 which is the same as the initial investment, this seems unreasonable since the value of the plant equipment decrease with the time .
Question 2
-Is construction of the new factory in the UK in the best interest of Axeon ?
According to the analysis by Marc Oosterling (director of manufacturing) Exhibit 6 Estimated variable cost of manufacturing AR-42 in the
Netherlands for shipment to the United Kingdom
Variable costs per ton:
Manufacturing
￡ 1,860
Shipping from Netherlands to UK
100
UK import duty
100
Total variable cost per ton
Total variable cost, 400 tons to UK
￡ 2,060
￡ 824,000
• Expanding the production in Netherland can achieve the
Economic of scale and reduce costs .This could be more profitable in a long run than build a new plant in UK.
• In our opinion expansion in Netherland is in the best interest of Axeon.
Question 3
-Why did Mr. van Leuven behave as he did?
Mr. van Leuven’s attitude: Approval Indecision
• His responsibility.
• Close analysis of the proposal.
Question 4
-Discuss what transfer price should be established if
AR-42 is supplied from the Netherlands to the UK.
According to the analysis of Marc Oosterling
(director of manufacturing)
Cost
Per ton
Axeon N. V.
ME2028 Behavioral Management Control
•
•
•
•
•
B7
Jianan Chen
Xiaofei Ren
Suyu Zhang
Xiao Zhou
880805-A307
861106-A261
870401-A280
871029-A926
Question1
-What do you feel about the initial analysis?
-Was there, in your opinion, anything wrong with it?
We do think there is something inappropriate with the initial analysis. • First thing is the over optimistic scenario which they have based on.
• Secondly, since Ian Wallingford want to borrow money for the investment, hence it is critical to analysis the effect of the debt service payment on net present value. Meanwhile the expect return should be higher. All this may decrease the profitability.
• Thirdly in the analysis of Estimated end-of –life value of UK assets, the salvage value of plant is 1400000 which is the same as the initial investment, this seems unreasonable since the value of the plant equipment decrease with the time .
Question 2
-Is construction of the new factory in the UK in the best interest of Axeon ?
According to the analysis by Marc Oosterling (director of manufacturing) Exhibit 6 Estimated variable cost of manufacturing AR-42 in the
Netherlands for shipment to the United Kingdom
Variable costs per ton:
Manufacturing
￡ 1,860
Shipping from Netherlands to UK
100
UK import duty
100
Total variable cost per ton
Total variable cost, 400 tons to UK
￡ 2,060
￡ 824,000
• Expanding the production in Netherland can achieve the
Economic of scale and reduce costs .This could be more profitable in a long run than build a new plant in UK.
• In our opinion expansion in Netherland is in the best interest of Axeon.
Question 3
-Why did Mr. van Leuven behave as he did?
Mr. van Leuven’s attitude: Approval Indecision
• His responsibility.
• Close analysis of the proposal.
Question 4
-Discuss what transfer price should be established if
AR-42 is supplied from the Netherlands to the UK.
According to the analysis of Marc Oosterling
(director of manufacturing)
Cost
Per ton