kanthal
...of which 6 were for stocked items and 22 were for non-stocked items. 4. Why did it take so long to implement the new cost system (Exhibit 4, in theory, should help answer this question). 5. Does the new cost system have any limitations? What might you suggest Kanthal do to improve the cost system? 6. What should Ridderstrale do about the two large unprofitable customers that are revealed by the Account Management System? 7. Do you see any long-term risks to Ridderstrale’s plan? Kanthal (A) Discussion Questions (the case begins on page 179 of the text) 1. What was Ridderstrale attempting to accomplish with the new Account Management System? Does Ridderstrale's strategy seem sensible given Kanthal’s competitive market? 2. Why was the previous cost system inadequate for Ridderstrale's new strategy? Why is the new system able to identify "hidden profit" and "hidden loss" customers that the previous cost system could not identify? This may help: Diagram how the old and new cost systems allocate production costs and SG& A costs. (Note: Exhibit 5, in theory, illustrates how the new cost system works; however, Exhibit 5 does not reconcile to any other information in the case.) What causes a customer to be a "hidden loss" customer? 3. Consider a product line whose products generate a 50% gross margin (after subtracting volume-related manufacturing and administrative expenses from prices). The cost for handling an individual customer order is SEK 750, and the extra cost to handle a production order for a non-stocked item is SEK 2,250. • Compare the net operating profit of two orders, both for SEK 2,000. One order is for a stocked item and the other is for a non-stocked item. • Compare the operating profits and profit margins of two customers, A and B. Both customers purchased SEK 160,000 worth of goods during the year. A’s sales came from three orders, for three different non-stocked items. B’s sales came from 28 orders, of which 6 were for stocked items and 22 were for non-stocked items. 4. Why did it take so long to implement the new cost system (Exhibit 4, in theory, should help answer this question). 5. Does the new cost system have any limitations? What might you suggest Kanthal do to improve the cost system? 6. What should Ridderstrale do about the two large unprofitable customers that are revealed by the Account Management System? 7. Do you see any long-term risks to Ridderstrale’s plan? Kanthal (A) Discussion Questions (the case begins on page 179 of the text) 1. What was Ridderstrale attempting to accomplish with the new Account Management System? Does Ridderstrale's strategy seem sensible given Kanthal’s competitive market? 2. Why was the previous cost system inadequate for Ridderstrale's new strategy? Why is the new system able to identify "hidden profit" and "hidden loss" customers that the previous cost system could not identify? This may help: Diagram how t...