Bridgeton Industries

Topics: Cost, Costs, Cost accounting Pages: 1 (304 words) Published: February 26, 2013
Bridgeton Industries 

1. Describe the competitive environment for Bridgeton as well as the cost accounting system currently in use.
When foreign competition and scarce, expensive gasoline began to play an important role in the market, Bridgeton began to lose domestic market share. The ACF Bridgeton plant faced new challenges in their production that led them to serious cutbacks like the closing of the ACF plant for manufacture of fuel-efficient diesel engines. By 1987, they classified their products in terms of “world class” competitive position and potential. With four criteria (quality, customer service, technical capability and competitive cost position) they classified their products in Class I (remain), II (observe) and III (outsource). The classification allowed Bridgeton to take decisions on how to better manage their products performance compared to their competitors. The cost accounting system was product costing, a mixed between job costing and process costing. 2. Explain why manifolds moved from Class II to Class III after oil pans and muffler-exhaust systems had been outsourced from the ACF. 

Despite improvements in the production process manifolds were downgraded from Class II to III. The results were not sufficient, even though they increased the uptime from an average of 30% to 65% they were behind their Japanese competitors that reached a “world class” goal of 80% uptime. In addition, as seen in Exhibit 2, the direct material costs for manifolds (based on stainless steel) is extremely high as a percentage of sales (around 40%) compared to the other products manufactured at ACF and at a better Class level.

However, there was a doubt on this move due to the possibility of new market requirements for lighter weight (more efficient manifolds). This represented a good opportunity for ACF because as they manufactured manifolds with stainless steel, demand could increase and therefore selling price too.
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