COST ACCOUNTING HOMEWORK

| November 28, 2016

Question
53. Motorcycle engines have become more complex over the past twenty years, partly as a result of environmental concerns about exhaust contaminants. Engineers have developed two basic approaches to solving the contaminant problem. The first emphasized the catalytic converter, a modification of the auto exhaust system designed to break down pollutants. The second emphasized redesign of the motorcycle engine’s combustion process, which adds more than twice the cost of the catalytic converter alone. However, redesigning the combustion process usually results in improved full efficiency.

Required:

A. Comment on the strategic advantage of redesigning the combustion process versus simply adding a catalytic converter.

B. What are the ethical questions, if any, that should be addressed in the above decision?

54.Many desktop and laptop computers in the marketplace today are built from components designed and manufactured by sub-contractors. While the extent of this practice is not well known to consumers, manufacture and sale of multi-component computers that use parts from many different technology companies continues to grow.

Required: If the assembling company is using value chain analysis in its strategic planning, comment on the following:

A. The cost justification for subcontracting.

B. The willingness of consumers to buy products they know contain subcontracted parts.

C. The problems of quality control facing the assembling technology company.

55. Levis Strauss and Co., maker of Levi’s familiar 501 and 505 brands of jeans, also make a “Signature” brand that was introduced several years ago for discount retailers such as Wal-Mart. Levi’s strategy with the new jeans was to sell a competitively priced pair. The jeans were to be about one-half the price of the familiar 501 and 505 jeans. To get costs down Levi’s would:

• Use cheaper fabrics and materials.

• Shun costly mass-market advertising.

• Strictly limit the number of fits, styles, and colors.

The Signature brand had a good first year of sales; assume that results for the second year and later are not yet in.

Required:

1. Assess the new strategy at Levi. What do you think are the potential benefits and risks?

2. How will the firm’s value chain and balanced scorecard change as a result of the new strategy?

56. Gordon Manufacturing produces high-end furniture products for the luxury hotel industry. Gordon has succeeded through excellence in design, careful attention to detail in manufacturing and in customer service, and through continuous product innovation. The manufacturing process at Gordon begins with a close consultation with each customer so that the finished product exactly meets the customer’s specifications. This commonly means unique designs, special fabrics, and high levels of manufacturing quality. In addition, Gordon believes that a key competitive edge it has over other competitors is that it has an outstanding design staff that is able to work with customers to come up with product designs that go beyond the customer’s expectations.

Required: What is the competitive strategy for Gordon Manufacturing? Explain your answer in two or three sentences.

57. Gordon Manufacturing produces high-end furniture products for the luxury hotel industry. Gordon has succeeded through excellence in design, careful attention to quality in manufacturing and in customer service, and through continuous product innovation. The manufacturing process at Gordon begins with a close consultation with each customer so that the finished product exactly meets the customer’s specifications. This commonly means unique designs, special fabrics, and high levels of manufacturing quality. In addition, Gordon believes that a key competitive edge it has over other competitors is that it has an outstanding design staff that is able to work with customers to come up with product designs that go beyond the customer’s expectations.

Anticipating a growth in the demand for luxury hotel rooms, Gordon has expanded its operations to include one new manufacturing plant, and by refitting some of the older plants with newer, more efficient equipment. The installation of the new equipment has caused some delays in filling some customer orders, and Gordon has shifted production from those plants with the delays to other manufacturing plants. The result has been an increase in some processing costs, transportation costs, and delays in meeting customer order deadlines. Also, the introduction of the new equipment has created some tensions with employees who see the new, more efficient equipment as a potential threat to their job security. There is also some disagreement among managers as to whether the new equipment will improve or reduce quality.

Required: Develop a SWOT analysis for Gordon Manufacturing. List one or more items in each category:

58. Gordon Manufacturing produces high-end furniture products for the luxury hotel industry. Gordon has succeeded through excellence in design, careful attention to quality in manufacturing and in customer service, and through continuous product innovation. The manufacturing process at Gordon begins with a close consultation with each customer so that the finished product exactly meets the customer’s specifications. This commonly means unique designs, special fabrics, and high levels of manufacturing quality. In addition, Gordon believes that a key competitive edge it has over other competitors is that it has an outstanding design staff that is able to work with customers to come up with product designs that go beyond the customer’s expectations.

Required: Present a value chain for Gordon Manufacturing with 5-6 activities and explain the role of each activity in the value chain.

59. Gordon Manufacturing produces high-end furniture products for the luxury hotel industry. Gordon has succeeded through excellence in design, careful attention to quality in manufacturing and in customer service, and through continuous product innovation. The manufacturing process at Gordon begins with a close consultation with each customer so that the finished product exactly meets the customer’s specifications. This commonly means unique designs, special fabrics, and high levels of manufacturing quality. In addition, Gordon believes that a key competitive edge it has over other competitors is that it has an outstanding design staff that is able to work with customers to come up with product designs that go beyond the customer’s expectations.

Required: Present a balanced scorecard for Gordon Manufacturing with 3-4 perspectives and 3-4 quantitative critical success factors ineach perspective.

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