Carefully read the following case and critically analyze it to answer the given questions at the end. Real Tape was a great company to work for in the 1960s. They were one of the premiere companies in the reel-to reel tape business. There was little competition on the West Coast, and had the region pretty much to themselves. When cassettes came in, they switched their product line but not the attitudes. They still did business the old way. But, the market had changed. There was competition from the Europeans, the Japanese, and from other Far East producers.
These competitors were pricing products below their costs. They had also improved their quality, were delivering products on time, and were introducing new products such as high-bias chromium oxide tapes before Real Tape did. By the time, Real Tape woke up, it was too late. They discovered that they had lost touch with their customers. Many had left or were or were leaving them.

Why did Real Tape not wake up earlier? There could be many reasons, but an important one was the lack of a good management accounting system. They thought of the accounting system as a necessary evil for external financial and tax reporting. As long as they were making money, no one cared. When they began to address the problems seriously, they found out that their accounting system had no information on many of the questions the management needed to know. The point is they mistook the profits they were showing on their external financial statements for profits they could sustain.

Questions
(a) What is (are) the major issue(s) of the case? Identify. [5]
(b) How should the management accountant of the company approach the problem? [10]

Answer rating: 100% (QA)

a They had been inflexible in control in that they in no way took the modifications in generation se... View the full answer