1. Describe the competitive environment for Bridgeton as well as the cost accounting system currently in use. Bridgeton Industries was a major supplier of components for the US domestic automotive industry. Initially, competition in this market was limited, and with the growing automobile industry Bridgeton Industries sold most of their production from the Automotive Component & Fabrication(ACF) plant to the Big-Three domestic automobile manufacturers. Their main competition was from other local suppliers and their own other plants. However, with the advent of globalization resulting in foreign automobile component suppliers entering the US market and the effect of increasing gasoline prices, the industry found itself vying for production contracts, and this affected Bridgeton which started experiencing increasing competition in the market. This, together with misanticipation of the sustenance of diesel-powered engines, resulted in setbacks for Bridgeton, causing it to shutdown some of its plant operations, as they were cost-ineffective.
2. Explain why manifolds moved from Class II to Class III after oil pans and muffler-exhaust systems had been outsourced from the ACF. Based on the product classification method used by Bridgeton, products that had costs 15% higher than their major competitor were classified as Class III, and products that had costs 5%-15% higher than their major competitor were classified as Class II. From the Model Budget for the ACF, we can see that the costs of producing manifolds (Direct labour & material) have increased by 3.9% ($40670 - $42265). This should have been more than 15% of the competitors cost of producing manifolds, which would have been the reason why manifolds were reclassified as Class III products. However, one point that needs to be noted is that ACF manufactured Stainless Steel exhaust manifolds, as opposed to cast-iron manifolds manufactured by their competitors, and since...
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