New Account Management

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ACG 5308 / Accounting, Planning and Control /Smith/

Kanthal (A)
Cooper, R. & Kaplan, R. S. (1999). The Design of Cost Management Systems: Text and Cases (Second Edition). Upper Saddle River, New Jersey: Prentice Hall. {Pp. 355-362} Provide complete, well-documented responses to each of the following items. A. Describe Kanthal's competitive position and strategy and operating problems. B. Describe the design, strengths, and weaknesses of Kanthal's existing (old) cost accounting system. C. Describe the design, strengths, and weaknesses of Kanthal's new account management system. D. Assume that Kanthal's products have gross profit margins (sales prices minus volume-related expenses) of 50% and the SEK 800 cost that Kanthal incurs to handle a customer order is one-third the extra cost the company incurs to handle a manufacturing order for a nonstocked item. Use these assumptions to compute the following: 1. the profits and profit margins for two small orders of SEK 2,000 each. One order is for a stocked item; the other, a non-stocked item. 2. the profits and profit margins for two customers, each having purchased SEK 200,000 of products. Customer A placed five orders for non-stocked items. Customer B placed 30 orders, six for stocked items and 24 for non-stocked items.

E. Describe Kanthal's "low-profit" and "high-profit" customers in both quantitatively and qualitatively terms. F. Describe the strategic and operating actions that Mr. Ridderstrale should take in response to the large number of unprofitable customers revealed by the new account management system.

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