Colorscope, Inc.

Harvard Business School Case

Case Software #XLS-812

197040

Copyright 2010 President and Fellows of Harvard College. No part of this product may be
reproduced, stored in a retrieval system or transmitted in any form or by any meanselectronic,
mechanical, photocopying, recording or otherwisewithout the permission of Harvard Business
School.

Exhibit 1 Price trend of color separations to scan, assemble, proof and output
printer specified film for a hypothetical direct mail catalog page with one image

Price/Page of work ($):

1991

1992

1993

1994

1995

Colorscope

1,100

900

750

650

600

400

425

450

475

500

Service-Bureau2

2 Service -Bureaus such as Kinko's and Alphagraphics typically do jobs that are cheaper, and
involve fewer and/or smaller pages.

Exhibit 4 Time/Cost Breakdown for the Catalog Producer

Direct mail catalogers constituted over 90% of Colorscope's customers. To produce an
average project run, in this example, 1 million copies of a 52-page catalog, costs would
break down as follows:

Design (3 weeks),
writing copy,
producing layouts,
gaining
management
approvals.

Photography (2
weeks), 200300 images,
studio and
location shots.

Prepress (2
weeks), 2
rounds of
proofs to
the project
manager.

Printing (3 days),
cutting, binding,
addressing for
national distribution

Distribution (23 weeks),

second class
bulk rate post.

$10,000

$50,000

$30,000

$1,300,000

$120,000

Exhibit 5 Top American Pre-press Competitors (does not include printers that have integrated forward)
Company
WACE USA
Applied Graphics Technologies
Black Dot Group
Schawk, Inc.

Sales Employees
(M$US)

Facilities Primary Business

(sites)

200
130
109
104

1,850
1,060
900
729

20
13
12
12

American Color

76

840

16 mags, dir. mail, pkg, agncy, newsp

Intaglio Vivi-Color
Enteron Group

60
56

450
400

13 packaging
4 mags, dir. mail, pkg, agncy, books

Kwik International
Color Associates
TSI Graphics
Blanks Color Imaging
Kreber Graphics, Inc.

41
37
27
24
22

110
390
313
230
165

1
1
4
1
2

magazines, direct mail, packaging

magazines, direct mail, packaging
mags, dir. mail, packaging, books
mags, dir. mail, packaging, agency

packaging, agency
packaging, publishing, catalogs
mags, dir. mail, packaging, books
mags, dir. mail, packaging, agency
mags, dir. mail, pkg, agncy, retail

Exhibit 8: Jobs completed in June 1996*

Job #
61001
61002
61003
61101
61102
61201
61202
61203
61204
61301
61401
61402
61403
61404
61405
61501
61502
61601
61602
61603
61701
61702
61801
61901
61902
62001
Total

Customer # Pages
10
16
10
16
10
32
11
16
11
16
12
16
12
32
12
32
12
32
13
128
14
16
14
16
14
16
14
16
14
16
15
16
15
16
16
32
16
4
16
4
17
16
17
16
18
4
19
4
19
16
20
1
545

*All figures are disguised

Revenue
$9,600
9,600
23,000
12,000
11,000
11,000
23,000
22,000
20,000
50,000
7,800
8,000
8,000
9,000
9,800
11,000
11,000
20,000
2,000
1,400
8,000
10,000
4,000
2,000
12,000
0
$315,200

$ 600.00
$ 600.00
$ 718.75
$ 750.00
$ 687.50
$ 687.50
$ 718.75
$ 687.50
$ 625.00
$ 390.63
$ 487.50
$ 500.00
$ 500.00
$ 562.50
$ 612.50
$ 687.50
$ 687.50
$ 625.00
$ 500.00
$ 350.00
$ 500.00
$ 625.00
$ 1,000.00
$ 500.00
$ 750.00
$
$ 578.35

23,400

40

585

Exhibit 9: Hours clocked at different workstations in June 1996*

JOB#
61001
61002
61003
61101
61102
61201
61202
61203
61204
61301
61401
61402
61403
61404
61405
61501
61502
61601
61602
61603
61701
61702
61801
61901
61902
62001
Idle Time
Capacity

Job
Customer # Preparatio
n
10
4
10
3
10
7
11
4
11
4
12
4
12
7
12
6
12
6
13
15
14
5
14
4
14
4
14
4
14
4
15
4
15
4
16
7
16
2
16
2
17
4
17
4
18
1
19
2
19
5
20
1
117
43
160

Applied
Scanning
Cost
$ 295.29
32
$ 221.47
24
$ 516.75
40
$ 295.29
16
$ 295.29
16
$ 295.29
16
$ 516.75
32
$ 442.93
34
$ 442.93
30
###
130
$ 369.11
14
$ 295.29
19
$ 295.29
20
$ 295.29
22
$ 295.29
20
$ 295.29
21
$ 295.29
20
$ 516.75
26
$ 147.64
5
$ 147.64
5
$ 295.29
20
$ 295.29
20
$ 73.82
5
$ 147.64
5
$ 369.11
19
$ 73.82
1
###
612
###
28
$11,811
$

Applied
Cost
$ 3,212.30
$ 2,409.22
$ 4,015.37
$ 1,606.15
$ 1,606.15
$ 1,606.15
$ 3,212.30
$ 3,413.06
$ 3,011.53
$ 13,049.95
$ 1,405.38
$ 1,907.30
$ 2,007.68
$ 2,208.45
$ 2,007.68
$ 2,108.07
$ 2,007.68
$ 2,609.99
$
501.92
$
501.92
$ 2,007.68
$ 2,007.68
$
501.92
$
501.92
$ 1,907.30
$
100.38
$ 61,435.14
$ 2,810.76

640 $ 64,245.90

73.82

Hours clocked in different work stations include rework hours given in Exhibit 10.
* All figures are disguised

100.38

Assembly
42
38
75
30
28
32
58
64
58
250
32
32
34
36
36
39
40
60
10
11
39
41
11
12
42
2
1152
128
1280

Applied
Cost
$ 3,034.89
$ 2,745.85
$ 5,419.44
$ 2,167.78
$ 2,023.26
$ 2,312.30
$ 4,191.03
$ 4,624.59
$ 4,191.03
$ 18,064.81
$ 2,312.30
$ 2,312.30
$ 2,456.81
$ 2,601.33
$ 2,601.33
$ 2,818.11
$ 2,890.37
$ 4,335.55
$
722.59
$
794.85
$ 2,818.11
$ 2,962.63
$
794.85
$
867.11
$ 3,034.89
$
144.52
$ 83,242.62
$ 9,249.18
$ 92,491.80
$

72.26

Output
8
8
16
4
4
4
8
8
8
32
4
8
4
4
4
4
8
8
1
2
4
4
2
1
4
1
163
37
200

Applied
Quality
Applied
Cost
Control
Cost
$ 1,185.57
7 $
604.25
$ 1,185.57
8 $
690.57
$ 2,371.15
8 $
690.57
$
592.79
4 $
345.29
$
592.79
4 $
345.29
$
592.79
6 $
517.93
$ 1,185.57
5 $
431.61
$ 1,185.57
6 $
517.93
$ 1,185.57
8 $
690.57
$ 4,742.30
30 $ 2,589.65
$
592.79
4 $
345.29
$ 1,185.57
7 $
604.25
$
592.79
3 $
258.97
$
592.79
5 $
431.61
$
592.79
4 $
345.29
$
592.79
4 $
345.29
$ 1,185.57
7 $
604.25
$ 1,185.57
9 $
776.90
$
148.20
1 $
86.32
$
296.39
1 $
86.32
$
592.79
3 $
258.97
$
592.79
5 $
431.61
$
296.39
1 $
86.32
$
148.20
1 $
86.32
$
592.79
5 $
431.61
$
148.20
1 $
86.32
$ 24,156.07
147 $ 12,689.29
$ 5,483.28
13 $ 1,122.18
$ 29,639.34
$

148.20

160

###
$

86.32

240000
83300
323300

Total
93
81
146
58
56
62
110
118
110
457
59
70
65
71
68
72
79
110
19
21
70
74
20
21
75
6
2191
249
2440

Cost

Material

$ 8,332.30
$ 7,252.68
$ 13,013.28
$ 5,007.28
$ 4,862.77
$ 5,324.45
$ 9,537.26
$ 10,184.09
$ 9,521.64
$ 39,554.03
$ 5,024.86
$ 6,304.71
$ 5,611.54
$ 6,129.47
$ 5,842.38
$ 6,159.54
$ 6,983.17
$ 9,424.76
$ 1,606.68
$ 1,827.13
$ 5,972.83
$ 6,289.99
$ 1,753.31
$ 1,751.19
$ 6,335.69
$
553.24
$190,160

$8,100
$4,600
$4,500
$1,800
$1,500
$1,500
$3,300
$3,400
$3,200
$14,000
$1,800
$3,100
$3,900
$2,100
$2,000
$2,200
$5,100
$3,300
$600
$1,000
$2,100
$2,500
$2,600
$2,700
$2,200
$200
$83,300

Cost +
Material
$16,432.30
$11,852.68
$17,513.28
$ 6,807.28
$ 6,362.77
$ 6,824.45
$12,837.26
$13,584.09
$12,721.64
$53,554.03
$ 6,824.86
$ 9,404.71
$ 9,511.54
$ 8,229.47
$ 7,842.38
$ 8,359.54
$12,083.17
$12,724.76
$ 2,206.68
$ 2,827.13
$ 8,072.83
$ 8,789.99
$ 4,353.31
$ 4,451.19
$ 8,535.69
$ 753.24
$273,460
$21,839.73
###

Selling
Price
$ 9,600.00
$ 9,600.00
$ 23,000.00
$ 12,000.00
$ 11,000.00
$ 11,000.00
$ 23,000.00
$ 22,000.00
$ 20,000.00
$ 50,000.00
$ 7,800.00
$ 8,000.00
$ 8,000.00
$ 9,000.00
$ 9,800.00
$ 11,000.00
$ 11,000.00
$ 20,000.00
$ 2,000.00
$ 1,400.00
$ 8,000.00
$ 10,000.00
$ 4,000.00
$ 2,000.00
$ 12,000.00
$
$315,200.00
Idle Time
Profit
Rent

CM

CM%

$ (6,832.30)
-71.17% -4132
$ (2,252.68)
-23.47% -1153
$
5,486.72
23.86%
$
5,192.72
43.27%
$
4,637.23
42.16%
$
4,175.55
37.96%
$ 10,162.74
44.19%
$
8,415.91
38.25%
$
7,278.36
36.39%
$ (3,554.03)
-7.11% -2554
$
975.14
12.50%
$ (1,404.71)
-17.56%
$ (1,511.54)
-18.89%
$
770.53
8.56%
$
1,957.62
19.98%
$
2,640.46
24.00%
$ (1,083.17)
-9.85%
417
$
7,275.24
36.38%
$
(206.68)
-10.33%
$ (1,427.13) -101.94%
$
(72.83)
-0.91%
$
1,210.01
12.10%
$
(353.31)
-8.83%
647
$ (2,451.19) -122.56% -1451
$
3,464.31
28.87%
$
(753.24)
$ 41,739.73
13.24%
$ (21,840.00)

###

### $ 600.00
### $ 600.00
$ 718.75
$ 750.00
$ 687.50
$ 687.50
$ 718.75
$ 687.50
$ 625.00
### $ 390.63
$ 487.50
$ 500.00
$ 500.00
$ 562.50
$ 612.50
$ 687.50
### $ 687.50
$ 625.00
$ 500.00
$ 350.00
$ 500.00
$ 625.00
### $ 1,000.00
### $ 500.00
$ 750.00
$
###

Exhibit 10: Rework hours*

Rework due to change in specifications by customer
JOB#

Job Preparation

61001
61002
61301
61502
61801
61901
Total

0
0
2
1
0
1
4

Scanning
$
$
$
$
$
$

147.64
73.82
73.82

16
8
5
4
1
1
35

Assembly
$ 1,606.15
$ 803.07
$ 501.92
$ 401.54
$ 100.38
$ 100.38

10
6
10
8
3
4
41

$
$
$
$
$
$

722.59
433.56
722.59
578.07
216.78
289.04

$
$
$
$

289.04
1,156.15
1,011.63
216.78

Quality Control initiated rework of house errors

JOB#

Job Preparation

61301
61402
61403
61603
Total

1
0
0
1
2

* All figures are disguised

Scanning
$
$
$
$

73.82
73.82

3
9
10
3
25

Assembly
$ 301.15
$ 903.46
$ 1,003.84
$ 301.15

4
16
14
3
37

by customer
Quality
Control

Output
4
4
2
1
1
0
12

$592.79
$592.79
$296.39
$148.20
$148.20
$
-

$ 172.64
$ 258.97
$ 172.64
$
$
$
-

Quality
Control

Output
1
2
2
1
6

2
3
2
0
0
0
7

$148.20
$296.39
$296.39
$148.20

1
2
1
0
4

Cost +
Total Material
$5,794
32
$3,188
21
$2,841
21
$2,702
14
$1,465
5
$1,463
6
$17,454
99

Total
$ 86.32
$ 172.64
$ 86.32
$
-

10
29
27
8
74

$1,899
$3,529
$3,398
$1,240
$10,065

Exhibit 11: Selected Financial Information for June 1996 *

Description

Job
Preparation

Wages
Depreciation
Rent
Others
Total Overhead
Floor Space in sq.
ft.

Scanning

8,000.0
500.0
2,000.0
1,311.5
11,811.5
1,000.0

Assembly

32,000.0
25,000.0
2,000.0
5,245.9
64,245.9
1,000.0

64,000.0
10,000.0
8,000.0
10,491.8
92,491.8
4,000.0

Output

Quality
Control

10,000.0
14,000.0
4,000.0
1,639.3
29,639.3
2,000.0

11,000.0
500.0
1,000.0
1,311.5
13,811.5
500.0

* All figures are disguised

Labor Hours
Idle
Actual
OH Applied

160
640
1280
200
160
43
28
128
37
13
117
612
1152
163
147
$
73.82 $
100.38 $
72.26 $
148.20 $
86.32
73.13%
95.63%
90.00%
81.50%
91.88%
$ 8,637.14 $ 61,435.14 $ 83,242.62 $ 24,156.07 $ 12,689.29

Underapplied by

3,174.33 $

2,810.76 $

9,249.18 $

5,483.28 $

$ 11,811.48 $ 64,245.90 $ 92,491.80 $ 29,639.34

1,122.18

$ 13,811.48

Idle

Total
125,000.0
50,000.0
30,000.0
20,000.0
225,000.0
15,000.0

13,000.0
6,500

2440
$

$ 212,000.00

92.21

92.213114754
15000

Exhibit 12: Materials expense in June 1996*

Job#

Total Materials
expense3

61001
61002
61003
61101
61102
61201
61202
61203
61204
61301
61401
61402
61403
61404
61405
61501
61502
61601
61602
61603
61701
61702
61801
61901
61902
62001
Total
*All figures are disguised
3
Includes materials for rework.

$5,400
3,500
4,500
1,800
1,500
1,500
3,300
3,400
3,200
13,000
1,800
3,100
3,900
2,100
2000
2200
3,600
3,300
600
1,000
2100
2,500
1,600
1,700
2,200
200
$75,000

Customer initiated
rework

Correction of house error

$2,700
1,100

1,000

$1,000
1,000
1,000

1,500
500
1,000
1,000
$8,300

$3,500

$8,100
$4,600
$4,500
$1,800
$1,500
$1,500
$3,300
$3,400
$3,200
$14,000
$1,800
$3,100
$3,900
$2,100
$2,000
$2,200
$5,100
$3,300
$600
$1,000
$2,100
$2,500
$2,600
$2,700
$2,200
$200
$83,300