colorscope in
Spring 2007
For information about citing these materials or our Terms of Use, visit: ________________ http://ocw.mit.edu/terms. 15.963 Managerial Accounting and Control
Spring 2007
MIT Sloan School of Management
Colorscope, Inc.
What is the external environment that
Colorscope currently faces?
Cheaper technology is lowering entry barriers.
Better technology is eroding quality-based competitive advantage.
Intense competition from
small stand-alones, large national chains, and backward (vertical) integration by large printers.
15.963 [Spring 2007]
Managerial Accounting & Control
2
Colorscope, Inc.
Intense price pressures, and erosion of rents (high margins). What has Colorscope’s competitive advantage been, and why?
Reputation for quality - poor quality is extremely costly because
pre-press is the last stage at which an error can be detected, mistakes in advertised price can be expensive for content provider to honor, and merchandisers take great pride in their catalogs.
15.963 [Spring 2007]
Managerial Accounting & Control
3
Colorscope, Inc.
Fast turnaround – this is very valuable to the content provider because it gives them more time to decide, for example, how much to discount which items (i.e., it gives them more time to observe their competitors actions in a fluid environment).
Actual costing differs from normal costing in that overhead allocation rate = actual overhead / actual volume of base.
This is ex post allocation rate – if actual overhead will not be known till year-end, then cost can only be determined then.
15.963 [Spring 2007]
Managerial Accounting & Control
4
Colorscope, Inc.
For Colorscope, we have actual, as opposed to budgeted data, so this is an illustration of actual costing.
How many overhead cost pools are appropriate for Colorscope?
The five
For information about citing these materials or our Terms of Use, visit: ________________ http://ocw.mit.edu/terms. 15.963 Managerial Accounting and Control
Spring 2007
MIT Sloan School of Management
Colorscope, Inc.
What is the external environment that
Colorscope currently faces?
Cheaper technology is lowering entry barriers.
Better technology is eroding quality-based competitive advantage.
Intense competition from
small stand-alones, large national chains, and backward (vertical) integration by large printers.
15.963 [Spring 2007]
Managerial Accounting & Control
2
Colorscope, Inc.
Intense price pressures, and erosion of rents (high margins). What has Colorscope’s competitive advantage been, and why?
Reputation for quality - poor quality is extremely costly because
pre-press is the last stage at which an error can be detected, mistakes in advertised price can be expensive for content provider to honor, and merchandisers take great pride in their catalogs.
15.963 [Spring 2007]
Managerial Accounting & Control
3
Colorscope, Inc.
Fast turnaround – this is very valuable to the content provider because it gives them more time to decide, for example, how much to discount which items (i.e., it gives them more time to observe their competitors actions in a fluid environment).
Actual costing differs from normal costing in that overhead allocation rate = actual overhead / actual volume of base.
This is ex post allocation rate – if actual overhead will not be known till year-end, then cost can only be determined then.
15.963 [Spring 2007]
Managerial Accounting & Control
4
Colorscope, Inc.
For Colorscope, we have actual, as opposed to budgeted data, so this is an illustration of actual costing.
How many overhead cost pools are appropriate for Colorscope?
The five