Ace Fertilizer Case
Ace Fertilizer Company: Ethical Cost Allocations and Price Determination
Introduction
Having a double undergraduate major in Accounting and Integrated Supply Management and an MBA from a renowned business school qualified Abby Conroy, CMA, for her position at Ace Fertilizer Company. She has been employed at Ace Fertilizer for the past three years, and is a highly respected employee. Her hard work and dedication to detail resulted in a series of rapid promotions. Currently, Abby is assistant director of manufacturing and is primarily responsible for special customer orders. Meeting the needs of customers in manufacturing special orders has become a very profitable portion of Ace’s operations. These special orders sometimes complement, but more frequently are totally unrelated to, Ace’s principal business of producing lawn and garden fertilizer. Ace Fertilizer actively seeks special orders in a highly competitive market, driven more by quality and on-time completion than price. Ace has established itself as an industry leader by consistently meeting customer expectations. The ability to meet the needs of customers through manufacturing special orders was the concept of Ace’s founders, and now passive owners, James Stegink and Norman Light. Both have engineering degrees and are considered by many to be quite the “tinkerers.” Abby reports to the director of manufacturing, George Smilee. The manufacturing operations are managed by Tom Brennen, the chief operating officer of Ace Fertilizer. In her role as assistant director, Abby is responsible for the design, bidding, manufacture, and ultimate delivery of special orders to customers. Abby develops and completes all special order contracts. George Smilee initials his approval of these contracts. Completed, initialed customer contracts then proceed to Tom Brennen for his ultimate approval and signature. All special orders at Ace Fertilizer follow a prescribed billing formula. These special orders, unless specific
Introduction
Having a double undergraduate major in Accounting and Integrated Supply Management and an MBA from a renowned business school qualified Abby Conroy, CMA, for her position at Ace Fertilizer Company. She has been employed at Ace Fertilizer for the past three years, and is a highly respected employee. Her hard work and dedication to detail resulted in a series of rapid promotions. Currently, Abby is assistant director of manufacturing and is primarily responsible for special customer orders. Meeting the needs of customers in manufacturing special orders has become a very profitable portion of Ace’s operations. These special orders sometimes complement, but more frequently are totally unrelated to, Ace’s principal business of producing lawn and garden fertilizer. Ace Fertilizer actively seeks special orders in a highly competitive market, driven more by quality and on-time completion than price. Ace has established itself as an industry leader by consistently meeting customer expectations. The ability to meet the needs of customers through manufacturing special orders was the concept of Ace’s founders, and now passive owners, James Stegink and Norman Light. Both have engineering degrees and are considered by many to be quite the “tinkerers.” Abby reports to the director of manufacturing, George Smilee. The manufacturing operations are managed by Tom Brennen, the chief operating officer of Ace Fertilizer. In her role as assistant director, Abby is responsible for the design, bidding, manufacture, and ultimate delivery of special orders to customers. Abby develops and completes all special order contracts. George Smilee initials his approval of these contracts. Completed, initialed customer contracts then proceed to Tom Brennen for his ultimate approval and signature. All special orders at Ace Fertilizer follow a prescribed billing formula. These special orders, unless specific