Colorscope Case Analysis
Case of Colorscope Inc
By Patrick Nedved Vanessa Osborne Danielle McCarthy
Table of Contents
Executive Summary
The current costing method that is being used is completely misrepresenting customer profitability and costs of rework completed.
Colorscope exhibits a flawed pricing strategy, inaccurate financial reports and losses to the company as a result. Using a more relevant costing method has proven that Colorscope is losing money through missed opportunities for jobs with extra client demand and rework costs. This affects management who rely on this information for strategic planning.
By attaining more accurate information, the pricing may be examined and adjusted to remain competitive with the smaller companies. In order to maximize efficiency and profitability, a new costing method must be implemented immediately.
Problem Identification
The problem facing Colorscope is the current costing system; it lacks operational efficiency which would more accurately determine pricing for quality projects.
Analysis
Colorscope Inc. has been using a pricing strategy that quotes customers with different demands at the same per page price. Customer scale, cost containment and efficiency are disregarded. Reducing the amount of rework completed by staff due to errors or due to change in customer demand is critical to containing costs put out by Colorscope. With its current approach, Colorscope incurs losses while at risk of losing prosperous relationships with customers.
One of Colorscope’s largest account representing 80% of their business, purchased their own graphic design and production equipment. Colorscope. Having lost the majority of the business, Colorscope is at risk of pressure to decrease their prices. The most beneficial solution to this problem is introducing activity based costing. This costing method can guide management when making business decisions on particular customers.
From ignoring trends in the business, Colorscope became
By Patrick Nedved Vanessa Osborne Danielle McCarthy
Table of Contents
Executive Summary
The current costing method that is being used is completely misrepresenting customer profitability and costs of rework completed.
Colorscope exhibits a flawed pricing strategy, inaccurate financial reports and losses to the company as a result. Using a more relevant costing method has proven that Colorscope is losing money through missed opportunities for jobs with extra client demand and rework costs. This affects management who rely on this information for strategic planning.
By attaining more accurate information, the pricing may be examined and adjusted to remain competitive with the smaller companies. In order to maximize efficiency and profitability, a new costing method must be implemented immediately.
Problem Identification
The problem facing Colorscope is the current costing system; it lacks operational efficiency which would more accurately determine pricing for quality projects.
Analysis
Colorscope Inc. has been using a pricing strategy that quotes customers with different demands at the same per page price. Customer scale, cost containment and efficiency are disregarded. Reducing the amount of rework completed by staff due to errors or due to change in customer demand is critical to containing costs put out by Colorscope. With its current approach, Colorscope incurs losses while at risk of losing prosperous relationships with customers.
One of Colorscope’s largest account representing 80% of their business, purchased their own graphic design and production equipment. Colorscope. Having lost the majority of the business, Colorscope is at risk of pressure to decrease their prices. The most beneficial solution to this problem is introducing activity based costing. This costing method can guide management when making business decisions on particular customers.
From ignoring trends in the business, Colorscope became