Kanthal needed an account management system, which could identify the hidden costs and hidden profits of the
Question:
Questions for Kanthal
- 1. What was the Kanthal president, Ridderstrale, attempting to accomplish with the Account Management System? Are these sensible goals?
2. Why did Ridderstrale feel the previous system was inadequate for the new strategy? Why could there be hidden profit and hidden loss customers with the previous cost system? What causes a customer to be a hidden loss customer?
3. How does the new Kanthal 90 Account Management system work? What new features does it offer? What are the limitations that may limit its effectiveness?
4. Consider a product line whose products generate a 50% gross margin (after subtracting, volume-related manufacturing and administrative expenses form prices). The cost for handling an individual customer order is SEK 750, and the extra cost to handle a production order for a non-stocked item is SEK 2,250.
4a. Compare the net operating profits of two orders, both for SEK 2,000. One order is for a socked item and the other is for a non-stocked item.
4b. Compare the operating profits and profit margins of two customers A and B. Both customers purchased SEK 160,000 worth of goods during the year. A’s sales came from three orders, for three different non-stocked items. B’s sales came from 28 orders, of which 6 were for stocked items and 22 or non-stocked items
5. What should Ridderstrale do about the two large unprofitable customers revealed by the account management system?
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young