A3. Reading through the case study, a few issues caused the cost failure that John Deere Component Works (JDCW) experienced in the 1980s. First, in the 1970s, John Deere spent over $1 Billion in plant modernization, expansion and tooling hoping to meet higher demand levels - profits were rising John Deere began to explore product expansion, which led to the $1 Billion spent on manufacturing plants. Instead, the external factors like falling commodity prices and collapsing farmland values left a demand void - a macro level viewpoint. Internally, JDCW struggled to remain competitive as it produced parts for less than half the tractors it was making in the 1970s. Departments viewed each other as competitors and only looked at price relations rather how well the corporation would act. JDCW failed to keep full costs manageable and outside competition (the $10 JDCW cost against the $7 outside bid example) was able to leverage for a cheaper bid. Parts were made, but too expensive to sell between departments. Also, JDCW was extremely involved and concerned about efficiency (family the parts), but never looked at the individual cost per part. The non-competitive parts used tremendous ACTS hours per hundred parts, which contributed to a high percentage of DL$/Material$ - the huge volume was worthless, because customers were not buying (Exhibit 8). Finally, JDCW’s incentive labor rate of 125% was excessive. The rate hurt the bottomline against the budget allocated to each department. A myriad of factors contributed to JDCW’s cost failure to include outside effects, lack of demand and underutilization of capacity, lack of competitive bidding due to high direct / full costs, and then ultimately overhead wages specifically the 125% incentive rate. The non cost competitive parts hurt the most, because of the high machinery, full and direct labor costs associated