Karex Case Study

2961 Words 12 Pages
Introduction
Karex Berhad (“Karex”) started as a family business with a manufacturing capacity of only 60 million pieces of condom per annum. Today, Karex has 3 manufacturing facilities across Pontian, Johor, Port Klang Selangor and Hat Yai, Thailand together with a workforce of 2,000 employees with the capacity to produce 4 billion pieces of condom per annum making us the largest condom manufacturer in the world. Every region has its own regulatory bodies to monitor and approve medical devices and Karex has the necessary licenses, certifications and accreditations to export to more than 110 countries across Africa, Asia, America and Europe. With these key licenses, Karex is readily able to supply to different geographical regions all across
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The calculation does not involve too much of complication. The managers of Karex just need to apply weights for the same types of product with its cost and aggregate the result. One single hurdle rate to categorize the products price saves a lot of time of the managers in stock valuation. Since, single rate is used, Karex can prompt decisions making more easily and at a faster pace. Using single hurdle rate also minimizes the effect of unusually high or low materials prices. It is practical for Karex because Karex’s inventory items are identical in type. The more similar items are, the more suitable weighted average costing becomes for …show more content…
For example, if Karex introduces a new type of condom that uses a better quality of rubber as its material, this upgraded product will still be sold at the price of WAC although it may be eligible for higher price. Same goes to the costs of the products, if original price of an item fluctuates widely or prices start and continue to rise, average costing can lead to under-pricing items, which in turn affects affect sales revenues and profits. The problem with the average cost method is that if inventory prices vary widely, Karex pricing may not recover the costs of the more expensive units. In fact, Karex could be taking a loss with your sales

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