Answer ABC Electronics is a leading manufacturer of consumer electronics and is facing increasing competition from newmarket entrants. The company's market share has declined over the past year. Senior management is debatingwhether to pursue a cost leadership strategy by reducing production costs or to invest in innovation and focuson a differentiation strategy by developing premium products with unique features. How should ABC Electronicsdecide which strategic direction to take? Global Garments Ltd. is a multinational clothing manufacturer thatoutsources production to factories in developing countries. Recently, the company has faced public criticism forthe poor working conditions in its supplier factories. The company is now considering whether to invest inimproving working conditions in these factories or continue prioritizing cost reduction to maintain competitivepricing. What should Global Garments Ltd. do in response to the public criticism, and how can it balancecorporate social responsibility (CSR) with profitability?

ABC Electronics must decide between reducing costs or innovating to stay competitive. Global…

Answered: ABC Electronics is a leading…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 27P: Maxwell Company produces a variety of kitchen appliances, including cooking ranges and dishwashers....

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Mindspin Labs Inc. is a manufacturing firm that has experienced strong competition in its traditional business. Management is considering joining the trend to the "service economy" by eliminating its manufacturing operations and concentrating on providing specialized maintenance services to other manufacturers. Management of Mindspin Labs has had a target ROI of 16% on an asset base that has averaged $8 million. To achieve this ROI, average total asset turnover of 2 was required. If the company shifts its operations from manufacturing to providing maintenance services, it is estimated that average total assets will decrease to $5 million.Required: Calculate net income, margin, and sales required for Mindspin Labs to achieve its target ROI as a manufacturing firm. Assume that the average margin of maintenance service firms is 2.50%, and that the average ROI for such firms is also 17%. Calculate the net income, sales, and total asset turnover that Mindspin Labs will have if the change…
Flamengo Co, a sporting goods manufacturing, decided to decentralize its operations. Which statement below is true about Flamengo after the decentralization process? O Flamengo's managers now make and implement fewer decisions than they did before the decentralization. O Flamengo's lower-level managers are responsible only for implementing decisions. O At Flamengo, overall profit margins can mask inefficiencies within various subdivisions. O At Flamengo Co., the CEO makes all the important operating and strategic decisions. O Flamengo's managers can make better decisions using local information.
Video Tech Ltd manufactures video game machines. Market saturation and technological innovations have caused pricing pressures that have resulted in declining profits. To stem the slide in profits until new products can be introduced, top management has started to focus on achieving cost savings in manufacturing and increases in sales volume. Sales can be increased only if production volume increases. Therefore, an incentive program has been developed to reward those production managers who contribute to an increase in the number of units produced and achieve cost reductions. In addition, a just-in-time purchasing program has been implemented, and raw materials are purchased on an as-needed basis.The production managers have responded to the pressure to improve manufacturing performance and this has resulted in an increase in the number of completed units over normal production levels. The video game machines are put together by the assembly group, which requires parts from both the…
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The following are some quotes provided by a number of managers at Hawkeye Machining Company regarding the company’s planned move toward a lean manufacturing system: Director of Sales: I’m afraid we’ll miss some sales if we don’t keep a large stock of items on hand just in case demand increases. It only makes sense to me to keep large inventories in order to ensure product availability for our customers.Director of Purchasing: I’m very concerned about moving to a lean system for materials. What would happen if one of our suppliers were unable to make a shipment? A supplier could fall behind in production or have a quality problem. Without some safety stock in our materials, our whole plant would shut down.Director of Manufacturing: If we go to lean manufacturing, I think our factory output will drop. We need in-process inventory in order to “smooth out” the inevitable problems that occur during manufacturing. For example, if a machine that is used to process a product breaks down, it…
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Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin es Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses Operating income Required: T-1 $ 200,000 70,000 20,000 $ 110,000 58,700 14,300 $ 73,000 T-2 $ 260,000 130,000 50,000 $ 80,000…
Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses Operating income T-1 $ 235,000 77,000 17,000 $ 141,000 1. 2. Required % increase in sales from T-1 3. Required % increase in…
Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses Operating income Required: T-1 $ 210,000 T-2 $ 268,000 72,000 22,500 $ 115,500 134,000 52,000 $ 82,000 77,000 23,000 62,000…

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