MyArmor, Inc. is a company that manufactures and sells cell phone covers. MyArmor developed
and patented a proprietary material called PlasticSteel Powder (PsP) that is used to make the cell
phone covers. PsP is the raw material input that is used in MyArmor’s injection molding machine
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to produce the cell phone covers. Cell phone covers produced with PsP are extremely durable and
do a superior job of protecting cell phones.
Manufacturing the cell phone covers is a fairly simple process. At the beginning of the day the
injection molding machine’s material hopper is filled with PsP. The machine injects the PsP into a
mold to produce the cell phone cover. During the day, additional PsP is poured into the material
hopper as needed. At the end of the day, any remaining PsP is removed from the material
hopper, and the machine is cleaned in preparation for the next day’s production run.
As a result of the above manufacturing process, MyArmor does not have any Work-in-Process
Inventory. That is, at the end of each day, they do not have any partially completed cell phone
covers. In terms of inventory, MyArmor only has:
Raw Materials Inventory (PsP)
Finished Goods Inventory (completed cell phone covers)
MyArmor works closely with a local chemical company to produce the PlasticSteel Powder used in
MyArmor’s manufacturing process. The chemical company has signed a confidentiality agreement
that covers MyArmor’s secret formula for PsP. The payment terms to the chemical company are
agreed upon each quarter, and are determined by quantities to be purchased and the cash flow
needs of the chemical company.
MyArmor distributes and sells their cell phone covers:
To wholesale distributors that service specialty retailers.
Direct to customers via the company’s website.
Kiosks in mall locations (this sales channel is new and is currently being tested with 2
There is some seasonality to MyArmor’s unit sales. Unit sales in the 3rd and 4th quarters of the
year are higher due to holiday sales. In the 3rd quarter, the wholesale distributors are ramping-up
inventory to prepare for holiday sales. In the 4th quarter, sales to wholesale distributors continue to
be strong and website sales increase.
Due to holiday demand, Average Selling Price per Unit can normally be increased in the 3rd and 4th
quarters of the year.