Cost Management: A Strategic Emphasis
7th Edition
ISBN: 9780077733773
Author: Edward Blocher, David Stout, Paul Juras, Gary Cokins
Publisher: McGraw-Hill Education
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Question
Chapter 13, Problem 44P
1.
To determine
Mention the activities of the Incorporation, BP which will be most valuable to the weeding couple and compare these to its cost and also state the activities that will be given greater attention in time and cost and also which requires less time and cost.
1.
Expert Solution
Explanation of Solution
A technique in which, given a competitive market price, the company determines the allowable (i.e., target) cost of the product or service, so the company can earn a desired profit. The cost life cycle is a series of the company's activities that initiate with research and development followed by design, production, sales / marketing, and customer services.
The formula to calculate the target cost is as follows:
Target cost = Competitive price – Desired profit
Quality function deployment (QFD) is value integration of marketing, engineering, analysis, and targeted costing to help determine which product components should be targeted for redesign.
The profit margin is the ratio of the profit (sales minus all expenses) of an enterprise divided by its revenue. It relates profit with sales and informs how well the company overall handles its finances. It's often expressed as a percent.
The QFD analysis shows that Incorporation, BP should actually spend more time and money on the planning meeting and less on the wedding day photography to put their costs more in line with the client's criteria.
| Customer | |||||
| Criteria | Rating | Percent | |||
| Fast Service | 30 | 10.0% | |||
| Getting Good Photos | 120 | 40.0% | |||
| Quality of Photo Finishing | 60 | 20.0% | |||
| Quality of Photo Books | 90 | 30.0% | |||
| 300 | 100.0% | ||||
| Activities | Target Cost | Percent | |||
| Planning Meeting | $ 800 | 16.0% | |||
| Take Photos | 2,400 | 48.0% | |||
| Prepare Proofs | 600 | 12.0% | |||
| Prepare Photo Book | 1,200 | 24.0% | |||
| $ 5,000 | 100.0% | ||||
| Activity/Criteria | Fast Service | Good Photos | Finishing | Book Quality | |
| Planning Meeting | 30% | 40% | 0% | 35% | |
| Take Photos | 5% | 60% | 0% | 15% | |
| Prepare Proofs | 35% | 0% | 50% | 0% | |
| Prepare Photo Book | 30% | 0% | 50% | 50% | |
| 100% | 100% | 100% | 100% | ||
| Activity/Criteria | Fast Service | Good Photos | Finishing | Book Quality | Importance Index |
| Criteria Value | 10% | 40% | 20% | 30% | 100% |
| Planning Meeting | 3% | 16% | 0% | 10.5% | 29.50% |
| Take Photos | 0.5% | 24% | 0% | 4.5% | 29.00% |
| Prepare Proofs | 3.5% | 0% | 10% | 0% | 13.50% |
| Prepare Photo Book | 3% | 0% | 10% | 15% | 28.00% |
| 100.00% | |||||
| Comparison of Cost and Value | |||||
| Importance Index | Cost Index | Value Index Ratio | |||
| Planning Meeting | 29.50% | 16.00% | 1.84 | Spend More | |
| Take Photos | 29.00% | 48.00% | 0.60 | Spend Less | |
| Prepare Proofs | 13.50% | 12.00% | 1.13 | No clear action | |
| Prepare Photo Book | 28.00% | 24.00% | 1.17 | No clear action | |
| 100.00% | 100.00% | ||||
2.
To determine
Mention some business and competitive issues that will be taken into account in considering the activities that are most valuable to the Incorporation, BP.
2.
Expert Solution
Explanation of Solution
A technique in which, given a competitive market price, the company determines the allowable (i.e., target) cost of the product or service, so the company can earn a desired profit. The cost life cycle is a series of the company's activities that initiate with research and development followed by design, production, sales / marketing, and customer services.
The formula to calculate the target cost is as follows:
Target cost = Competitive price – Desired profit
Quality function deployment (QFD) is value integration of marketing, engineering, analysis, and targeted costing to help determine which product components should be targeted for redesign.
The QFD analysis shows that Incorporation, BP should actually spend more time and money on the planning meeting and less on the wedding day photography to put their costs more in line with the client's criteria.
| Customer | |||||
| Criteria | Rating | Percent | |||
| Fast Service | 30 | 10.0% | |||
| Getting Good Photos | 120 | 40.0% | |||
| Quality of Photo Finishing | 60 | 20.0% | |||
| Quality of Photo Books | 90 | 30.0% | |||
| 300 | 100.0% | ||||
| Activities | Target Cost | Percent | |||
| Planning Meeting | $ 800 | 16.0% | |||
| Take Photos | 2,400 | 48.0% | |||
| Prepare Proofs | 600 | 12.0% | |||
| Prepare Photo Book | 1,200 | 24.0% | |||
| $ 5,000 | 100.0% | ||||
| Activity/Criteria | Fast Service | Good Photos | Finishing | Book Quality | |
| Planning Meeting | 30% | 40% | 0% | 35% | |
| Take Photos | 5% | 60% | 0% | 15% | |
| Prepare Proofs | 35% | 0% | 50% | 0% | |
| Prepare Photo Book | 30% | 0% | 50% | 50% | |
| 100% | 100% | 100% | 100% | ||
| Activity/Criteria | Fast Service | Good Photos | Finishing | Book Quality | Importance Index |
| Criteria Value | 10% | 40% | 20% | 30% | 100% |
| Planning Meeting | 3% | 16% | 0% | 10.5% | 29.50% |
| Take Photos | 0.5% | 24% | 0% | 4.5% | 29.00% |
| Prepare Proofs | 3.5% | 0% | 10% | 0% | 13.50% |
| Prepare Photo Book | 3% | 0% | 10% | 15% | 28.00% |
| 100.00% | |||||
| Comparison of Cost and Value | |||||
| Importance Index | Cost Index | Value Index Ratio | |||
| Planning Meeting | 29.50% | 16.00% | 1.84 | Spend More | |
| Take Photos | 29.00% | 48.00% | 0.60 | Spend Less | |
| Prepare Proofs | 13.50% | 12.00% | 1.13 | No clear action | |
| Prepare Photo Book | 28.00% | 24.00% | 1.17 | No clear action | |
| 100.00% | 100.00% | ||||
A drawback from the above assessment is that there are some costs of taking the pictures on the wedding day (additional lighting, backup cameras, and equipment, etc.) which can make it hard to cut the price of this activity. The main take-away from the interpretation is to pay more attention to the planning meeting; when done carefully, it can make a significant contribution to the fulfillment of the couple with the photos and thus undoubtedly to the quality of the wedding photo book.
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Chapter 13 Solutions
Cost Management: A Strategic Emphasis
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Ch. 13 - Prob. 11QCh. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - Prob. 17QCh. 13 - Prob. 18QCh. 13 - Prob. 19QCh. 13 - Prob. 20BECh. 13 - Prob. 21BECh. 13 - Prob. 22BECh. 13 - Prob. 23BECh. 13 - Prob. 24BECh. 13 - Prob. 25BECh. 13 - Prob. 26BECh. 13 - Prob. 27BECh. 13 - MaxiDrive manufactures a wide variety of parts for...Ch. 13 - Bowman Specialists Inc. (BSI) manufactures...Ch. 13 - Prob. 30ECh. 13 - Rick’s is a popular restaurant for tine dining....Ch. 13 - Prob. 32ECh. 13 - Prob. 33ECh. 13 - Prob. 34ECh. 13 - Prob. 35ECh. 13 - Prob. 36ECh. 13 - Prob. 37ECh. 13 - Prob. 38PCh. 13 - Morrow Company is a large manufacturer of auto...Ch. 13 - Prob. 40PCh. 13 - Prob. 41PCh. 13 - Prob. 42PCh. 13 - Prob. 43PCh. 13 - Prob. 44PCh. 13 - Prob. 45PCh. 13 - Prob. 46PCh. 13 - Life-Cycle Costing Kate Stephens, the COO of...Ch. 13 - Prob. 49PCh. 13 - Prob. 50P
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