1. What was the Kanthal president, Ridderstråle, attempting to accomplish with the Account Management System? Are these sensible goals?
Ridderstrale had the objective to find hidden profits and losses contained in their current accounting system. The old system did not fully disclose how their costs were applied to the sales accounts. The goals are very sensible as they will allow them to move forward with the proper information.
2. Why did Ridderstråle feel that the previous cost system was inadequate for the new strategy?
The new strategy/system was needed “to promote high-margin products to high-profit customers.” The old system didn’t work well because it applied S&A expenses as a percentage of sales revenue and
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* What new features does the Account Management System offer? What are its limitations?
The new system provided a better way to identify hidden costs and determine if customers are causing profits or losses. They will be able to show profits and losses by product, customer, and market. The limitation of this new system may be the cost of implementing this new methodology and training employees how to use it.
4. Consider a product line whose products generate a 50% margin (revenue minus volume-related manufacturing and volume-related S&A expenses but before subtracting the sales cost of handling an order and the manufacturing cost to handle an order for a non-stocked item). The sales-order cost for handling an individual customer order is SEK 750, and the extra manufacturing-order cost to handle a production order for a non-stocked item is SEK 2,250.
a. Compare the net operating profits of two orders, both for SEK 2,000. One order is for a stocked item and the other is for a non-stocked item.
Stocked items: $2000*50%=$1000-$750 = $250 SEK
Non-Stocked items: $2000*50%=$1000-$2250 = ($1250) SEK
b. Compare the operating profits and profit margins of two customers, A and B. Both customers purchase SEK 160,000 worth of goods
Assuming that the company’s goal is to maximize profits, the current cost system is not an appropriate tool for strategic planning. The ambiguity of the overhead costs per product makes it difficult to accurately analyze the cause and effect relationships of changes and/or improvements to specific product line.
7. Based on the data in case Exhibits 1, 5, and 6, is Costco’s financial performance superior to that at Sam’s Club and BJ’s Wholesale?
Although the company did show an increased gross profit of $8,255,000 with $6,358,000 less Net Sales in 2013 versus 2012, that increase is due to the reduction in product Cost of Goods Sold by $14,613,000. Since increases in product price will negatively affect sales, one of management’s primary goals is to keep prices stable. This objective is achieved through implementation of cost cutting programs, investing in more efficient equipment, and automation of more steps in the production process.
One of specialty’s managers felt that the profit potential was so great that the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock-outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios?
In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.
C. Using a table to compare the difference between problem #1 and problem #2, respectively, we can see the obvious differences between the optimal stocking quantity and daily expected profit figures.
In my opinion, the four criteria, quality, customer service, technical capability, and competitive cost position, are very appropriate to classify its products because this company considered most all of aspect of products to catalog and classify and this way can help this company to find out which type product should use which method to reduce its costs.
6. A product’s margin is determined by subtracting its manufacturing costs (labor and material) from its price. Logically, higher prices and lower labor and material costs result in higher margins. Keeping in mind the Customer Buying Criteria, how would you increase margins for a Low End product? How would you increase margins for a High End product? Hint: The criteria can be found in the Capstone Courier Market Segment Analyses.
Due to the information, 20 acres of land equal 80 sheep according to the exchange rate of last year, a one-room cabin equal 3 acres of land and equal 12 sheep finally, a plow equals 2 goat and equal 2/3 sheep according to last year’s exchange rate and 2 carts which were traded with a poor acre of land equals 8 sheep plus 400 sheep. So Deyonne’s total assets are 500(2/3) sheep. Deyonne’s liabilities and assets deduction are 35 sheep plus 3 sheep, which will come to 38 sheep,
Next, you find that all of the salespeople are paid a straight salary, and all receive exactly the
Operating profit margin figures in the table above show the return from net sales[13]. However profit margin ratios are high enough for the 3 years, there is a fall from 12.86% to 11.26% during 2011-12. Sales revenue increases with a higher rate than gross profit so there is a poor
with a number of strategic issues facing a capital-intensive, mature industry. Their product costing system was
Q.3 Why Superior Improved Profitability during the period January 1 to June 30, 2005? How useful was the data in Exhibit 4 for the purpose of this analysis?
Computer Company F’s Net Income is 3.3% of its total sales, while Computer Company E’s Net Income is 6.2% of its total sales. Computer Company F’s lower net income could be a result of its “beginning to recover from a dramatic decline in its market share”, which is why I believe Computer Company F is Company 2.