NIKEiD: Custom Processes for Custom Shoes

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Presentation transcript:

NIKEiD: Custom Processes for Custom Shoes

Background NIKEiD allows customers to design custom shoes and apparel. NIKEiD products earn between 30% to 50% more profit than Nike’s traditional in-store products. Customizations require Nike to adapt the manufacturing process, which results in a longer wait time for the customer.

Multiple Choice Questions 1. Assume that NIKEiD’s predetermined overhead rate is 130% of its direct labor costs. How much overhead should be applied for a job order that requires total direct labor of $100? a. $230 b. $30 c. $130 d. $160

Multiple Choice Questions 2. Assume Nike incurred the following manufacturing costs this period. Using the information provided, calculate Nike’s overhead cost as a percentage of direct labor. Direct Materials: $200,000 Direct Labor: $260,000 Overhead: $325,000 a. 163% b. 125% c. 130% d. 76%

Discussion Questions 3. Using NIKEiD, customers are able to create custom shoes and apparel. Discuss whether the process of manufacturing these custom products would likely use job order or process operations? 4. Customized products created with NIKEiD take substantially longer to produce and deliver than Nike’s traditional in-store products. Discuss reasons why customized products would take longer to produce and deliver.