Hilton Manufacturing Co.

Harvard Business School Case 192063

Case Software #XLS-793

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Exhibit 1 Hilton Manufacturing Company, Income Statement for Year
Ending December 31, 2003.

Gross Sales $40,690,234

Cash discount 622,482
Net sales 40,067,752
Cost of sales 25,002,386
Gross margin 15,065,366
Less: Selling expense $7,058,834
General administration 2,504,597
Depreciation 5,216,410
Operating income 285,525
Other income 78,113
Income before interest 363,638
Less: interest expense 555,719
Income (loss) $(192,081)
Exhibit 2 Hilton Manufacturing Company, Analysis of Profit and Loss by Product, Year Ended December 31, 2003

Product 101 Product 102 Product 103

Total
Thousands $per Cwt. Thousands $per Cwt. Thousands $per Cwt. Thousands

Rent 721 0.3383 603 0.5856 718 0.7273 2,042

Property taxes 240 0.1125 192 0.1862 153 0.1555 585
Property insurance 201 0.0941 153 0.1486 202 0.2047 556
Compensation insurance 317 0.1486 167 0.1620 172 0.1747 656
Direct labor 4,964 2.3282 2,341 2.2740 2,640 2.6746 9,945
Indirect labor 1,693 0.7941 814 0.7903 883 0.8947 3,390
Power 86 0.0403 96 0.0929 116 0.1171 298
Light and heat 57 0.0269 49 0.0472 39 0.0392 145
Building service 38 0.0180 30 0.0288 28 0.0288 96
Materials 2,935 1.3766 1,809 1.7572 1,862 1.8862 6,606
Supplies 201 0.0941 183 0.1774 135 0.1363 519
Repairs 68 0.0319 57 0.0557 39 0.0396 164

Total 11,522 5.4036 6,493 6.3059 6,986 7.0787 25,002

Selling expense 3,496 1.6397 1,758 1.7069 1,805 1.8286 7,059
General administration 1,324 0.6209 499 0.4850 681 0.6904 2,505
Depreciation 2,169 1.0172 1,643 1.5955 1,404 1.4223 5,216
Interest 201 0.0941 153 0.1490 202 0.2043 556

Total cost 18,711 8.7755 10,546 10.2423 11,078 11.2243 40,338

Less other income 39 0.0184 20 0.0192 19 0.0192 78
18,672 8.7571 10,526 10.2231 11,059 11.2051 40,260

Sales (net) 19,847 9.3084 9,977 9.6900 10,243 10.3784 40,068

Profit (loss) 1,175 0.5513 (549) (0.5331) (816) (0.8267) (192)
Unit sales (cwt.) 2,132,191 1,029,654 986.974
Quoted selling price $9.41 $9.91 $10.56
Cash discounts taken, percent of
selling price 1.08% 2.22% 1.72%

Note: Figures may not add exactly because of rounding.

Exhibit 4 Hilton Manufacturing Company, Profit and Loss by Product, at Standard, Showing Variations from January 1 to June 30, 2004.

Product 101 Product 102 Product 103

Total
Standard Total at Standard Total at Standard Total at Standard Total Actual Variance
per Cwt. Standard per Cwt. Standard per Cwt. Standard (thousands) (thousands)

Rent 0.3383 337 0.5856 417 0.7273 365 1,119 1,021 + 98

Property taxes 0.1125 112 0.1862 133 0.1555 78 323 307 + 16
Property insurance 0.0941 94 0.1486 106 0.2047 103 302 278 + 24
Compensation insurance 0.1486 148 0.1620 115 0.1747 88 351 348 +3
Direct labor 2.3282 2,321 2.2740 1,619 2.6746 1,341 5,281 5,308 -27
Indirect labor 0.7941 792 0.7903 563 0.8947 448 1,803 1,721 + 82
Power 0.0403 40 0.0929 66 0.1171 59 165 170 -5
Light and heat 0.0269 27 0.0472 34 0.0392 20 80 83 -3
Building service 0.0180 18 0.0288 21 0.0288 14 53 50 +3
Materials 1.3766 1,372 1.7572 1,251 1.8862 946 3,569 3,544 + 25
Supplies 0.0941 94 0.1774 126 0.1363 68 288 288 --
Repairs 0.0319 32 0.0557 40 0.0396 20 91 88 +3

Total production cost 5.4036 5,387 6.3059 4,490 7.0787 3,548 13,425 13,206 + 219
Selling expense 1.6397 1,635 1.7069 1,215 1.8286 917 3,767 3,706 + 62
General administration 0.6209 619 0.4850 345 0.6904 346 1,310 1,378 -68
Depreciation 1.0172 1,014 1.5955 1,136 1.4223 713 2.863 2,686 177
Interest 0.0941 94 0.1490 106 0.2043 102 302 290 + 12

Total cost 8.7755 8,748 10.2423 7,294 11.2243 5,626 21,668 21,266 + 402
Less other income 0.0184 18 0.0192 14 0.0192 10 42 42 --

8.7571 8,730 10.2231 7,280 11.2051 5,617 21,626 21,224 + 402

Actual sales (net) 9.3084 9,279 9.6900 6,900 10.3784 5,202 21,382 21,382 --

Profit or loss 0.5513 550 (0.5331) (380) (0.8267) (414) (244) 158 + 402
Unit Sales (cwt.) 996,859 712,102 501,276

Note: Figures may not add exactly because of rounding.

Actual sales (net) 9.3084 9,279 9.6900 6,900 10.3784 5,202 21,382 21,382 --

Materials 1.3766 1,372 1.7572 1,251 1.8862 946 3,569 3,544 + 25

Supplies 0.0941 94 0.1774 126 0.1363 68 288 288 --
Repairs 0.0319 32 0.0557 40 0.0396 20 91 88 +3
Direct labor 2.3282 2,321 2.2740 1,619 2.6746 1,341 5,281 5,308 -27
Insurance 0.11641 116.05 0.1137 80.95 0.13373 67.05 264.05 265.4 -1.35
Power 0.0403 40.0000 0.0929 66.0000 0.1171 59.0000 165.0000 170.0000 -5

Contribution Per Unit 5.3209 5303.9500 5.2191 3717.0500 5.3909 2700.9500 11723.9500 11718.6000
Ranking 2 3 1
Units 996,859 712,102 501,276

Contribution Per Dollars 0.57 0.57 0.54 0.54 0.52 0.52 54.83% 54.81%
Ranking 1 2 3

Contribution Per Capacity 2.2854093 2.2852003 2.2951187 2.2958925 2.0155799 2.0141312

Ranking 1 2 3

Q1
Contribution 2700.9500
Less Profit -158
Loss 2542.9500
Q 2. Product 101
Reduction of Price
Change in Prices
Materials 1.377 1.445
Supplies 0.094 0.099
Repairs 0.032 0.032
Direct labor 2.328 2.328
Insurance 0.116 0.116
Power 0.040 0.040

3.988 4.061

Selling Price 9.410 8.640

Less - Cash Discount 0.101628 0.093312

Net Sales 9.3084 8.5467

VC 3.9875 4.0610

Contribution 5.3209 4.4856

Volume 75000 100000

Total Contribution 399064.65 448564.3 49499.65

Contribution Per unit
Measures absolute profitability per unit sold.
Best Product = 103 because it contributes $5.39 profit per unit.
Use case → Pricing decisions and profit-maximizing product choice when demand is unconstrained.

Contribution Per Dollars

Measures profitability efficiency: how much contribution Hilton earns per $1 of sales.
Best Product = 101 because it converts the highest % of sales into contribution.
Use case → Marketing & sales prioritization when sales value is fixed.
For example: If a customer gives Hilton a $10,000 order, prioritizing Product 101 maximizes contribution.

Contribution Per Capacity

Measures profitability per scarce capacity resource.
Best Product = 102 because it produces the highest contribution per $1 of labor.
Use case → Production planning under capacity constraints.
If Hilton has limited labor hours or machine time, Product 102 should be prioritized.
Decision Context Relevant Metric Best Prod
Maximizing total profit when demand is high Contribution per Unit 103
Maximizing return on sales orders Contribution per Dollar 101
Maximizing profit under limited capacity Contribution per Capacity 102
Why
Highest absolute contribution per unit
Best % contribution per revenue
Uses capacity most efficiently