Case Study 4

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Dec 6, 2023

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Running head: Case Study 4: The Rossford Plant 1 Case Study 4: The Rossford Plant Andrew Alward Fitchburg State University

The Rossford Plant 2 Section 1: Introduction This case study takes a examination into a corporation named Libby-Owens-Ford Co[ CITATION Col \l 1033 ]. The business manufactures glass for customers across the United States of America and has two procedures for manufacture[ CITATION Col \l 1033 ]. The first procedure is named “Float,” which includes manufacturing the raw glass; the other procedure is called “Fabrication,” which deals with the cleaning up of the glass and preparing it and making it ready for distribution[ CITATION Col \l 1033 ]. MacGuidwin and Lackner, controllers for the company, perceiving a problem with the production system in use, proposed a new cost assignment method for general plant costs; this changed the focus of the system from being a traditional cost assignment system, to being a dynamic management tool[ CITATION Col \l 1033 ]. This essay will discuss the reasons for the change in focus, evaluate the new cost assignment method and provide an opinion on its effectiveness. The discussion of this case study will revolve around the chief concerns that are requiring attention, the facts of this exploration will answer two main questions as posed in the case study. The first objective to learn is exactly why did MacGuidwin and Lackner make adjustments to the focus of the method? The second question is whether, in my opinion, the new and improved cost allocation technique for general plant expenditures is a much greater improvement than the old method, as well as why or why not? Section 2: A summary of the main issues of concern that require The principal topics of concern for this case study foremost began once two controllers became alarmed over how the company was allocating costs and how accurately and correctly it was doing this. If inaccurate, this is a substantial issue when it derives to the financials of a business and for forecasting the future financial issues of the company as well; even a slight

The Rossford Plant 3 deviance in accuracy can potentially have massive impacts on the stability of the company[ CITATION Kap04 \l 1033 ]. If costs are erroneously allocated, then the Organization will not verify which departments are gainful and which departments are not, and corrections cannot be properly implemented to remedy the situation[ CITATION Kap04 \l 1033 ]. This leads to the improper completion of performance reviews, lost revenue and much more, involving the running of the business from day to day. MacGuidwin and Lackner reasoned that the established, currently employed expense assignment system was not sufficient to meet the needs of the modern organization[ CITATION Col \l 1033 ]. They put forward that the conventional system was too fixed in place and did not take into consideration the dynamic aspect of the organization and the ever-changing nature of the market/economy[ CITATION Col \l 1033 ]. They also reasoned that the conventional system did not provide decision makers with the necessary information to make well informed choices[ CITATION Col \l 1033 ]. As a result of this, they proposed the solution of a new cost assignment method that was much more active and provided management with the required information to make the best decisions possible. Section 3: A Detailed Case Discussion As outlined in the previous sections, the controllers, realizing there was a problem, analyzed the situation and determined that the system in place, on the raw materials side, seemed to be running in sufficient manner and in an effective way[ CITATION Act \l 1033 ]. They believed the problems were originating from the constructing side, since on the building side, 80% of the costs were allocated at a flat rate per foot[ CITATION Col \l 1033 ]. This flat rate cost is detrimental, because a flat rate cost is not affected by the size of the project, but remains the same amount, meaning that no matter what the alterations or specifications are performed on

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The Rossford Plant 4 the glass, the price would be the same for the improved product, as for the basic glass product. As a result, the company was not recognizing expenses correctly and was losing profits. To rectify this situation, MacGuidwin and Lackner improved the attention of the approach they were using, for the reason that it was obsolete and was not accurately recording costs in the correct places[ CITATION Col \l 1033 ]. The new system they implemented would identify the expenditure per square foot of each product, rather than a fixed cost of these products[ CITATION Act \l 1033 ]. The new cost assignment method, as outlined by MacGuidwin and Lackner, has several advantages over the previous or original system. First, the new structure is more energetic and takes into account the transforming nature of business in today’s economy[ CITATION Col \l 1033 ]. This allows management, at the different levels of the company, to better understand the costs associated with the processes and with their decisions. Second, the new system provides the decision-makers with the required information to make accurate and educated decisions. Finally, the new system allows for more precise cost assignments, which can help the business save on expenditure in the long run, as well as appropriately budget to account for each department’s needs and make necessary adjustments to these expenditures. Section 4: Conclusion Based on the previous sections, it can be surmised that it is crucial to get accurate information and results, when allocating costs to all areas of the business, especially some very important areas like, specifically in this case, fabrication[ CITATION Col \l 1033 ]. Allocating incorrectly can distort the financial statements of the company and give an inaccurate picture of the financial standing of the business[ CITATION Sha19 \l 1033 ]. MacGuidwin and Lackner proposed a new cost assignment method for general factory costs that improved the focus of the

The Rossford Plant 5 system from being a traditional cost assignment system, to being a robust new management tool, which will improve the company’s efficiency[ CITATION Col \l 1033 ]. The new structure is more flexible, provides management with the right tools and information to make well-informed decisions, and allows for increased accuracy as regards cost assignments[ CITATION Col \l 1033 ]. The new cost assignment system is much healthier than the longstanding traditional method for numerous reasons, as it provides all levels of management with valuable and accurate information to correctly make the right decisions and allow for a more accurate cost assignment[ CITATION Act \l 1033 ][ CITATION Col \l 1033 ].

The Rossford Plant 6 References Activity-Based Costing. (n.d.). Retrieved from University of Maryland : https://leocontent.umgc.edu/content/umuc/tgs/mba/mba620/2208/learning-topics/activity- based-costing.html?ou=513517 Colson, R., & MacGuidwin, M. (n.d.). The Rossford Plant. Retrieved from https://learn-us-east- 1-prod-fleet01- xythos.content.blackboardcdn.com/blackboard.learn.xythos.prod/5a34362ea9dd3/298346 9?X-Blackboard-S3-Bucket=blackboard.learn.xythos.prod&X-Blackboard- Expiration=1697943600000&X-Blackboard-Signature=8Y4K1mjG63USIBdWqWKJu Joubert, S. (2019, 11 11). What is Cost Estimation in Project Management? Retrieved from Northeastern University : https://graduate.northeastern.edu/resources/cost-estimation-in- project-management/ Kaplan, R. S., & Andrewson, S. R. (2004, 11). Time-Driven Activity-Based Costing. Retrieved from Harvard Business Review: https://hbr.org/2004/11/time-driven-activity-based- costing

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Case Study 4

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