Capstone Situation Analysis

The Situation Analysis is the third Getting Started activity. The purpose of this tutorial is to
explain various concepts used throughout the simulation. However, in order for this activity
to be completed you will need to get all of the answers correct. The guide below walks you
through how to develop the correct answers. Keep in mind that the examples may not
correspond with your simulation, but the steps will remain constant. However, if you get
stuck do not hesitate to reach out to the Capsim support team.

Ideal Spots
The “ideal spot” represents the highest point of demand for each of the two consumer
bases. To calculate the ideal spots, you will need to determine how far in advance of or
behind the segment center each segment of consumers would like their product. Example
found below.

Segment Center by Round

Traditional Low End
Round Pfmn Size Pfmn Size
0 5.0 15.0 2.5 17.5
1 5.7 14.3 3.0 17.0
2 6.4 13.6 3.5 16.5
3 7.1 12.9 4.0 16.0
Offset 0.0 0.0 -0.8 +0.8

Notice:
The
traditional
consumer
s have an
offset of
0.0 and
0.0; they
want their
In order to find the traditional ideal spot for round zero and one, you will take the segment
products
center +/- the offset.
in the

Round 0exact
Example:
center.
Pfmn 5.0 + 0.0 = 5.0
However,
not
Size 15.0 – 0.0 = 15.0
every
segment
has the
Repeat this process for each round and each segment. However, pay close attention to the
same
notice found above.
offset
(see red
box
indicating
-0.8 and
+0.8 for
Demand Analysis
The demand analysis will help get you familiar with the Capstone Courier. This is the main
report that you will use to make decisions and see how your company did in prior years. You
will want to pull up the Capstone Courier from Round 0 in a separate tab as you will have to
reference it for the rest of the tutorial. Please follow the steps below.

Traditional Example:
1. Find the segment analysis pages of the Courier (pages 5-9)
2. Locate the statistics for each segment (on the top left-hand corner of these pages)

3. Using the highlighted fields above, you will be able to locate the demand for round zero
as well as the rate. (%)
4. Calculate the demand for round one using the numbers found in step three
a. (Total Industry Unit Demand) * (Next Year’s Segment Growth Rate) = Z

Example: 7,387 * 0.099 = 731

b. (Z) + (Total Industry Unit Demand) = Demand for next round

Example: 731 + 7387 = 8118

Input this answer for Round 1.

5. Repeat this process for each of the other segments.

Notice
: When
multipl
ying by
percen
tages,
remem
ber to
Capacity Analysis
Similar to the demand analysis, this section will help get you familiar with the Capstone
Courier. Please follow the steps and example below.

Product Able Example:

1. Locate the “Production Analysis” page of the Capstone Courier (page 4)

Notice:
Each
company
will start
with
different
product
names.
2. Find your product on the list and look for “Capacity Next Round”
The
3. The answer that you find for step two can be input under the “First Shift Capacity –
example
Company” column in the situation analysis
used is for
4. Figure out the number of companies that are competing in your industry
company
a. Usually there are six companies (Andrews, Baldwin, Chester, Digby, Erie, and
Andrews
Ferris), however this may change depending on your course
and their
b. You can find the number of companies by going to the front page of the
product Courier and counting the number of company names

5. Able. The to find the “First Shift Capacity – Industry” take your answer for step three
In order
first letter
and multiply it by your answer for step four
of each
Example: 1800 * 6 = 10800
company
name will
6. You have two shifts of workers that you can utilize. (Think of this as your morning
always
shift and your night shift.) Since you have already found your first shift capacity in
correspon
step three, you can simply multiply that by two to find the answer for “First &
d with the
Second Shift Capacity – Company”
first letter
Example:
of each 1800 * 2 = 3600
product
name.
7. In order to find the “First & Second Shift Capacity – Company” you can take your
answer for step six and multiply it by six (or however many companies you counted
in step 3).

Example: 3600 * 6 = 21600

8. The automation level can be found on the Capstone Courier (page 4) under
“Automation Next Round” for your product line.

9. To calculate the “Cost to Double Capacity” you will need to use the formula below
a. First Shift Capacity * [6 + (4 * automation level)]

Example: 1800 * [6 + (4 * 4)]

4 * 4 = 16

6 + 16 = 22

1800 * 22 = 39600

10. To calculate the “Cost to Raise Automation to 10” you will need to use the formula
below
a. First Shift Capacity * [4 * (10 – automation level)]

Example: 1800 * [4 * (10 – 4)]

10 – 4 = 6

4 * 6 = 24

1800 * 24 = 43200

Notice:
It’s really
important
to pay
attention
to the
order of
operations
. This is
why the
examples
in steps 9-
10 are
broken
down.
When
calculating
a number
and using
a long
Margin Analysis
In the margin analysis, you will calculate your current contribution margin as well as the
potential contribution margin that your product could have in each of the two segments. The
“potential” section illustrates how low you can get your costs. You will still need the
Capstone Courier for this section.

Current Margin Example

1. Locate the “Production Analysis” page of the Capstone Courier (page 4)

2. Find your product on that list and locate the “Price” and input that into the Situation
Analysis
3. You can also find the “Material Cost” and “Labor Cost” on this page to input into the
Situation Analysis
4. In order to find the “Second Shift (Y/N)” you can view the Plant Utilization column.
Anything over 100% indicates that a second shift was used.
a. In this example, the plant utilization is 66% so the second shift answer would
be N.
5. Contribution Margin ($) can be calculated using the numbers found in steps two
through three
a. Contribution Margin ($) = Price – (Material Cost + Labor Cost)

Example: 28 – (11.59 + 7.49)

28 – (19.08) = 8.92

6. Contribution Margin (%) can be calculated using the numbers found in steps two and
five
a. Contribution Margin ($) / Price

Example: 8.92 / 28 = 0.318

0.318 = 32%
Margin Potential Example using the Traditional Segment:
1. In order to determine the margin potential, you will need the segment analysis pages
from the Courier (pages 5-9) and you will want to locate the “Customer Buying
Criteria”

2. To determine the maximum price, you will pull the highest number from their
acceptable range that’s provided in the customer buying criteria (in this case it would
be $30)
3. The minimum material will require another calculation found below
a. As the rest of the numbers are provided, you will find the lowest acceptable
MTBF on the customer buying criteria. This is the lowest point of their
acceptable range.
b. Minimum Material Cost = [(Lowest Acceptable MTBF * 0.30) / 1000] +
Training Edge Position Cost
Example: [(14000 * 0.30) / 1000] + 3.80

[(4200) / 1000] + 3.80

[4.2] + 3.80 = 8

4. The minimum labor will require another calculation found below

a. Minimum Labor Cost = [11.20 – (1.12 * Automation Rating Provided)] + 1.12

Example: [11.20 – (1.12 * 8.0)] + 1.12

[11.20 – (8.96)] + 1.12

[2.24] + 1.12 = 3.36

5. You will use the formula below to find the contribution margin ($)
a. Maximum Price – (Minimum Material + Minimum Labor)

Example: 30 – (8 + 3.36)

30 – (11.36) = 18.64

6. You will use the formula below to find the contribution margin (%)
a. Contribution Margin ($) / Maximum Price

Example: 28.18 / 35 = 0.805

0.805 = 81%
 : You
will not
want to
enter
the
price or
Consumer
MTBF Report
The Consumer
in the Report illustrates what is important to consumers. In this exercise, you will
“grade” situatio
your product based upon how well it is meeting the customer expectations. You will
refer to then Capstone Courier in order to view the Customer Buying Criteria.
analysi
s, but
rather
the
grade
that
they
would
Please note:
be
The chart provided for you in the Situation Analysis is only for the Traditional
Segment. These instructions will show you how to replicate that chart by splitting the range
given
into three graded portions. You will need to create your own using the same method for the
by the
other segments. The numbers will not be the same for every segment!
consu
mers.
Traditional Segment Example:
1. Locate the “Segment Analysis” page of the Capstone Courier for Traditional (page 5)
2. Find the expected range that the Traditional consumers find acceptable for price and
MTBF under the “Traditional Customer Buying Criteria”

3. Looking at the price range, you will want to break it up into three sections
a. If the price range on the customer buying criteria is $20 - $30 it will need to
be ranked with an A, B, or C in order to “grade” your product

Price Grading Example:

Grade Earned A B C
Price Range $20-$23.33 $23.34-$26.66 $26.67-$30.00
 4. Looking at the MTBF range, you will want to break it up into three sections
a. If the MTBF range on the customer buying criteria is 17000 - 23000 it will
need to be ranked with an A, B, or C in order to “grade” your product

No
tic
e:
Co
ns
um
ers

MTBF wa
Grading Example:
nt
Grade Earned C B A
a
MTBF
lo Range 14000 - 15666 15667 - 17333 17334 – 19000
w
pri
5. ce,
Locate your product’s price and MTBF under “Top Products in Traditional Segment”
(found at the bottom of page 5)
bu
ta
hig
h
MT
BF
(R
eli
abi
lity
)
so
th
e
6. Then, you’ll compare your products “List Price” to which section it falls into from
gr
step three.
adi a. In this example, the price is $28 which falls into the “C” grade. This is what
ng you would enter in the situation analysis.
7. Next, you’ll compare your products “List Price” to which section it falls into from
step four.
a. In this example, the MTBF is 17500 which falls into the “A” grade. This is
what you would enter in the situation analysis.