Costs and Unprofitable Independent Financial
(1) Citibank
(a) Why has Citibank introduced a Performance Scorecard? What are its advantages and disadvantages? (b) Assume you are Lisa Johnson. Complete Exhibit 1 to evaluate James’ performance.
(2) Colorscope
(a) Why would any customer go to Colorscope rather than the large printers listed in Exhibit 3? (b) Set up a two-stage cost system to figure out the profitability of different jobs. Choose resource drivers to allocate the cost of resources to cost pools. Then choose cost drivers to allocate the costs from various pools to jobs. Calculate the cost driver rates. Calculate the profitability of Job 61001. (c) Calculate the profitability of Customer 16. (d) How costly is rework? What should Colorscope do about rework?
(3) Superior
(a) All four questions on page 4 of the case.
(4) Kanthal
(a) Why could there be hidden profit and hidden loss customers with the previous cost system? (b) How does the Kanthal 90 system work? What new features does it offer? What are its limitations? (c) What should Ridderstrale do about the two large unprofitable customers revealed by the new Kanthal 90 system?
(5) Owens & Minor
(a) How has the role of distributors changed over time? What is the value added by O&M? (b) What effect will ABP have on distributors, customers and suppliers? (c) Explain how the pricing matrix works. What types of customers will adopt ABP first? (d) What are the obstacles to implementing ABP at Ideal? How easy is it for O&M’s competitors to adopt ABP?
(6) Wilkerson
(a) Given some of the problems with Wilkerson’s cost system, should the company abandon overhead assignment to products? Why or why not? (b) Develop a diagram of the existing cost system showing how costs flow to products. Develop a similar diagram for the ABC system. (c) What actions should management take, based on the ABC system, to improve profitability?
(7) Cooperative Bank
(a) Why has Citibank introduced a Performance Scorecard? What are its advantages and disadvantages? (b) Assume you are Lisa Johnson. Complete Exhibit 1 to evaluate James’ performance.
(2) Colorscope
(a) Why would any customer go to Colorscope rather than the large printers listed in Exhibit 3? (b) Set up a two-stage cost system to figure out the profitability of different jobs. Choose resource drivers to allocate the cost of resources to cost pools. Then choose cost drivers to allocate the costs from various pools to jobs. Calculate the cost driver rates. Calculate the profitability of Job 61001. (c) Calculate the profitability of Customer 16. (d) How costly is rework? What should Colorscope do about rework?
(3) Superior
(a) All four questions on page 4 of the case.
(4) Kanthal
(a) Why could there be hidden profit and hidden loss customers with the previous cost system? (b) How does the Kanthal 90 system work? What new features does it offer? What are its limitations? (c) What should Ridderstrale do about the two large unprofitable customers revealed by the new Kanthal 90 system?
(5) Owens & Minor
(a) How has the role of distributors changed over time? What is the value added by O&M? (b) What effect will ABP have on distributors, customers and suppliers? (c) Explain how the pricing matrix works. What types of customers will adopt ABP first? (d) What are the obstacles to implementing ABP at Ideal? How easy is it for O&M’s competitors to adopt ABP?
(6) Wilkerson
(a) Given some of the problems with Wilkerson’s cost system, should the company abandon overhead assignment to products? Why or why not? (b) Develop a diagram of the existing cost system showing how costs flow to products. Develop a similar diagram for the ABC system. (c) What actions should management take, based on the ABC system, to improve profitability?
(7) Cooperative Bank