The Clifton Industries Case Study Essay

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.

While we are performing our analysis on different aspects of the company, we look at the three main types of cost. When we remain devoted to improving our costs, and the faults related, we show our same devotion to our consumers. This is portrayed by the quality of products we put on the shelves. Prevention costs, appraisal costs and Failure costs are areas

“Companies can choose to use the accounting job order costing method when they have a single product line or numerous products to manufacture. However, it is less costly and less time-consuming if they elect to use process costing when calculating the manufacturing of a single product line. With similarities

The automotive component & Fabrication Plant, ACF, was the original plant site for Bridgeton Industries, a major supplier of components for the domestic automotive industry. All of the ACF’s production was sold to the Big-Three domestic automobile manufactures. Its main competitors were local suppliers and other Bridgeton plants. This company did very well but recently it became less effective when foreign competition and scarce, expensive gasoline caused domestic loss of market share. For boost its selling, it made four criteria, quality, customer service, technical capability, and competitive cost position to evaluate three classifications of products.

Due to the shift from high-end devices to commodities in PC industry, the market competition grows significantly. Thus, cost factors such as, material devaluation, scrap, write-off, price protection and discounts are changing from insignificant roles to high importance factors. In order to achieve company’s profitability in the highly competitiveness PC industry, Hewlett-Packard (HP) carried out inventory-Driven Cost (IDC) metric to help them match the demand and supply, and create value in the supply chain.

1. What is the competitive situation faced by Wilkerson? The critical product in term of market competition is the pumps of Wilkerson Company. The pumps are Wilkersons major product line with a production of about 12,500 units per month. Pumps currently have the lowest gross margin among all products, because competitors had been reducing prices on pumps and Wilkerson adopted its prices in order to remain competitive and to maintain the volume. 2. Given some apparent problems with Wilkersons cost system, should executives abandon overhead assignment to products entirely by adopting a contribution margin approach in which manufacturing overhead is treated as a period expense? Our conclusion is, that they should not adopt

However, this system was found to be “ineffective for costing and bidding individual parts.” Id. While some machines produced low cost parts at high volume, other machines were producing high cost parts at low volume, which created cost discrepancies between various machines and thus misallocation of

John Deere Component Works (JDCW), subdivision of John Deere and Co. was in charged specifically of the manufacturing of tractor component parts. The demand for JDCW’s products had problems due to the collapse of farmland value and commodity prices. Numerous and constant failures in JDCW’s competition for bids, alerted top management to start questioning their current costing methods. As an outcome, the analysis has to be guided to research on the current costing methods with the intention of establishing legitimacy and to help the company in adopting a more appropriate costing system.

There are several weaknesses in the process that Carter used for decision making. Perhaps the most severe of them all was the lack of sight with respect to the strategy of the Webster Industries. The financials for the company clearly show that by October 1975 the company was probably recovering from the downturn. If that was indeed the case, Carter should requested an adjustment to the anchoring bias of 15% downsizing target and examined the list of criteria that Stevens’ laid out in the light of sustained growth. Healthy growth requires people who are competent in their current job as well as people with potential. Consequently the group should have

John Deere Component Works (JDCW), subdivision of John Deere and Co. was in charged specifically of the manufacturing of tractor component parts. The demand for JDCW’s products had problems due to the collapse of farmland value and commodity prices. Numerous and constant failures in JDCW’s competition for bids, alerted top management to start questioning their current costing methods. As an outcome, the analysis has to be guided to research on the current costing methods with the intention of establishing legitimacy and to help the company in adopting a more appropriate costing system.

INTRODUCTION Businesses – from manufacturing, merchandising and service industries alike – take careful consideration in the analysis of their costing systems in order to be able to set up competitive prices in the market. Misallocation of costs may lead to incorrect price estimates, continuous production of unprofitable products, and ineffective processing schedules. In this case study, we will discuss the costing methods which Zauner Ornaments have used or is currently using and, in conclusion, be able to distinguish the advantages and disadvantages of each costing method. CASE CONTEXT The case seeks to assist Zauner’s comptroller, Yu Chia-yi, in determining the best costing method for their overhead costs. In addition we also aim to

In this report, I will provide a discussion of how activity-based costing (ABC) may assist Sierra Ltd to address its current issues. With the fragmented market in the recent past, companies are using different costing and pricing strategies to remain competitive. Organisations have implemented product diversification and automation. This trend has made the allocation of costs for production overhead an important aspect in calculating product cost. The important issues facing Sierra Ltd include the use of a traditional approach for product costing that distorts some of the organisation’s product cost. In addition, the company is experiencing problems related to generations of sales prices, hence, the company adds 30% margin to production costs of all products to get actual sales prices. Another issue is about engine component sales that have been unstable in comparison to transmission and clutch components. These issues will be addressed in this report by assessing Sierra Ltd current costing and pricing practices. The report will also discuss whether ABC is suitable for the organisation, and finally, the report will present important factors the management of Sierra should take into consideration to ensure successful adoption of ABC if they decide to go ahead with Baljit’s proposition.

KNJ Manufacturing, Inc. should look into getting with a copy of the approved vendor lists for the customers they have. And, begin to supply raw materials for their customers instead of just “machining and labor” only. They should be looking into outsourcing their work with the local shops to find ways of increasing their offerings to include things, such as, heat-treating, mechanical testing, material coating and hardness testing. KNJ should offer one-stop shop capabilities instead of losing opportunities because the customer does not want to send the part to multiple locations to get simple work done. Currently, KNJ does not have the license to do heat-treating, hardness testing, or coating, but this is something that KNJ Manufacturing may want to consider offering now or in the immediate future, to increase their market share and desirability in an already slow market.

A firm may create a cost advantage either by reducing the cost of the individual value chain of activities or as what have been said before reconfiguring the value chain to suit lower production costs. Once the value chain is defined, a cost analysis can be performed by assigning costs to the value chain activities. The costs obtained from the accounting report may need to be modified in order to allocate them properly to the value creating activity. In this way cost leadership is achieved by the firm in the Industry it is operating. Cost leadership would then affect cost and pricing of the firms’ product and the more logical strategy that the firm would employ is

Under the new cost system, two broad sources of costs were identified: manufacturing and SM&A. All costs within these categories were reclassified as either volume driven or order driven. Hence, four cost pools were set up.