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Contents Table

1Introduction ………………………………………………………………………….2

2 What effect would that action have had on the profit for the first six months of 2000.

3 Should the company have reduced the price of the 100 series from $2.45 to $ 2.25..2

4 Which is Berkshire’s most profitable product line …………………………………2

5 What advice for Mr. Magers………………………………………………………3-5

6 Conclusion………………………………………………………………………..5-6

7 Reference……………………………………………………………………………6

Introduction

Cost management is the process of production and operation of various cost accounting, cost analysis, the cost of decision-making and cost control, and a series of scientific management behavior general. This assessment is show the identify of cost management, combine with the Berkshire Threaded Fasteners Company situation, which idea is the most profitable , what should the manager do to change the different situation. Cost management generally includes the cost forecast, cost decision, cost planning, cost accounting, cost control, cost analysis, cost assessment functions. Cost management is an important part of enterprise management, and it requires a systematic and comprehensive scientific and reasonable, to increase production and savings, strengthen economic accounting, to improve enterprise management, improve the overall level of cost management is of great significance. In this paper will show how to take full use of cost management to help the company overcome the challenge.

Background
Berkshire Threaded Fasteners Company made only three lines of metal fasteners ( nuts and bolts) , the 100 series, the 200 series, and the 300 series. These were sold by the company sales force for use by heavy industrial manufacturers. All of the sales force on a salary basis. Sola all three lines but in varying proportions. In February 2000, Brandon Cooks was appointed general manager by Joe Mager, president of Berkshire Threaded Fasteners Companies. During a good business year the manager received the income statement for 1999, that the loss of over $70,000. In order to change this situation, they have different ideas. In July 2000, Bosworth announced a price reduction on the 100 series from$2.45 to $2.25per 100 pieces. This created an immediate pricing problem for its competitors. 1.If the company had dropped the 300 series as of January 1, 2000, what effect would that action have had on the profit for the first six months of 2000? The price will reduce from $2.75 to $2.52, so the profit loss is $0.40. At the same time 100 series price will reduce from$2.45to $2.22, profit loss is $0.07. So the first six months profit all loss.

2. If the company have reduced the price of the 100 series from$2.45 to $2.25,but the unit sales will increase from 750,000 to 1000,000. If the price reduce , we can calculate $2.25X1000,000-$2.45X750,000=$412,500. Even though it has profit, but the total cost is $2.29 is higher than $2.25. it means

3 Which is Berkshire’s most profitable product line?
| 100series unit sales $000| 200series unit sales$000| 300series unit sales $000| Standard$ 000| 2000| 996859| 712102| 501276| (76)|
1999| 2119672| 1029654| 986974| (73)|
Reduce | (1122,813)| (317,552)| (485,698)| (3)|
Decrease rate| 53%| 31%| 49%| 4.1%|
| | | | |

We can saw the chart, compare with 1999, in 2000 in the same series it decrease 1122,813,317,552,485,698. So Cook’s idea is not work. If the price reduce from $2.45 to $2.25, the total cost is $2.29, the price is lower than the cost. Standard unit sales is loss $76000. In fact Joe Magers had only four years experience with the company and in early 2000 he was 34years old, so he lack of experience, so he attracted Cook from a competitor by offering a stock option incentive in addition to salary. The arrangement was that Cook as general manager would have full authority to execute and changes he desired. And there is another problem Berkshire sold throughout New England and...
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