Kathal
1. Ridderstrale, the president was attempting to accomplish the company’s strategy for higher growth and profitability. He thought the account management system would enable the company to get sales managers to accept responsibility for promoting high-margin to high- profit customers.
2. The Kanthal 90 plan specified overall profit objectives by division, by product line, and by market. The Kanthal 90 account management system is to determine how much profit was earned each time a customer placed a particular order. The system should attempt to measure the costs that individual customer orders placed on the production, sales, and administrative resources of the company.
The new features of the new system is to find both “hidden profit” orders, those whose demands on the company were quite low and the “hidden loss” orders, those customer orders that under the existing system looked profitable but which in fact demanded a disproportionate shares of the company’s resources to fulfill.
The limitations are as follows. The amount of tedious work required collecting all the numbers and it took almost a year to develop a system to collect the data in the proper form. Also, even in production, the company had problems identifying the costs that related to stocked and non-stocked orders.
3. a. For stocked item order Sales value SEK 2,000 Gross margin (@50% of sales value) 1,000 Less: order costs 750 Non-stocked costs 0 Net operating profit SEK 250 For non-stocked item order Sales value SEK 2,000 Gross margin (@50% of sales value) 1,000 Less: order costs 750 non-stocked costs 2,250 Net operating profit SEK (2,000)
b. For Customer A Order costs:
2. The Kanthal 90 plan specified overall profit objectives by division, by product line, and by market. The Kanthal 90 account management system is to determine how much profit was earned each time a customer placed a particular order. The system should attempt to measure the costs that individual customer orders placed on the production, sales, and administrative resources of the company.
The new features of the new system is to find both “hidden profit” orders, those whose demands on the company were quite low and the “hidden loss” orders, those customer orders that under the existing system looked profitable but which in fact demanded a disproportionate shares of the company’s resources to fulfill.
The limitations are as follows. The amount of tedious work required collecting all the numbers and it took almost a year to develop a system to collect the data in the proper form. Also, even in production, the company had problems identifying the costs that related to stocked and non-stocked orders.
3. a. For stocked item order Sales value SEK 2,000 Gross margin (@50% of sales value) 1,000 Less: order costs 750 Non-stocked costs 0 Net operating profit SEK 250 For non-stocked item order Sales value SEK 2,000 Gross margin (@50% of sales value) 1,000 Less: order costs 750 non-stocked costs 2,250 Net operating profit SEK (2,000)
b. For Customer A Order costs: