...million through sales of 986,974 units of product 103 during the year 2004. However, rest of the cost associated with product 103 is fixed cost and Super Manufacturing Company will have to bear this fixed cost regardless of its decision to produce product 103 or not. Currently, product 103 incurs net loss of $2.209 million, and if Super Manufacturing Company decides not to produce product 103, then it will incur additional loss of $2.671 million through net contribution lost by product 103. However, if product 103 is dropped then it will increase the net loss of Super Manufacturing Company to $3.359 million. Hence, Waters’ decision to keep the product 103 and use its contributions to cover the fixed cost is a good decision. Q2.) Should Superior Manufacturing Company lower as of January 1, 2006 its price of product 101? What will be the new price of product 101? The fixed and variable cost structure of product 101 shows that 54% of its standard cost is fixed and 46% is variable. However, a decrease in product 101 sales units will result in lost contribution because the larger part of cost is fixed and Superior Manufacturing Company will have to bear the fixed cost regardless the number of units sold. Hence, lower the number of sales units, lesser will be the recovery of fixed cost, therefore, Superior Manufacturing Company is suggested to lower its price in order to increase number of sales units of product...
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...Superior Manufacturing Company Description Superior manufacturing company produces three kinds of industrial products (101,102 and 103) in its own dedicated factories. It uses a job costing system helping to evaluate and arrange the whole process of production, which is later replaced by a standard cost system in 2005. In the market of similar products, Superior faces seven competitors, one of which is the dominant company Samra, a price-‐maker to some extent. As shown in the figure, Superior suffered a loss during 2004. What is worse, a weakened industry and some other problems like price reduction are coming in the following years. Problems and issues In terms of management changes and other reasons, Superior suffered a big loss even during an optimistic business year. It is obvious situation didn’t change better in the next year. It...
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...decision to keep product 103? 3 Analysis of Profit and loss statement 4 Sensitivity analysis 6 Strategic scenarios 8 Q2) Should superior lower as of January 1, 2006 its prices of product 101? To what price? 10 Q3) why did Supreme improve profitability during the period of January 1 to June 30, 2005? 13 Analysis 14 Q4) why is it important that Superior has an effective cost system? 17 What is your overall appraisal of the company’s cost system and its use in report to management 18 List the strengths and weaknesses of the system and its related reports for the purpose management uses the system’s output 18 What recommendations, if any, would you make to waters regarding the company’s cost accounting system and its related reports? 19 Initial Analysis of Superior Manufacturing Company Case :- 1) After death of Richard Harvey (2004), founder and president of Superior Manufacturing Company (SMC), Paul Harvey took over. Paul Harvey had only 4 years of experience. Soon followed serious management problems because of some bad decisions made by Paul Harvey. The income statement of 2004 reflected net loss of $0.68million in a good business year. To solve this problem Herbert Waters was brought over as General Manager of SMC. 2) SMC manufactured 3 different products namely 101, 102, 103 and was among the top 8 companies in the industry. Samra Company was market leader and announced price annually and other follow. Due to no product differentiation price cut was not an option...
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...DI MILANO Master of Science in Management, Economics and Industrial Engineering [pic] Management Control Systems Prof. Paolo Maccarrone Second Assignment: Superior Manufacturing Company Analysis Group Ferrario Andrea 709407 Rognoni Susanna 720851 Taiana Marco 672497 Trifonov Angel 720619 A.Y. 2007/2008 Contents Q1.Do you agree with Water’s decision to keep product 103? 3 Analysis of the P&L statement of 31 December 2004 3 Sensitivity analysis 5 Strategic scenarios 9 Q2. Should Superior lower as of January 1, 2006 its price of product 101? To what price? 11 Q3. Why did Superior improve profitability during the period January 1 to June 30, 2005? How useful was the data in exhibit 4 for the purpose of this analysis? 14 Revenues 15 Costs 15 Q4. Why is it important that Superior has an effective cost system? What is your overall appraisal of the company’s cost system … 19 Why is it important that Superior has an effective cost system? 19 What is your overall appraisal of the company’s cost system and its use in report to management? 19 List the strengths and weaknesses of the system...
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...In Class Quiz October 8, 2013 Question: What factor or factors explain real wage convergence between the old world and the new during the period roughly 1870-1914? Did everyone benefit equally from the process? Answer: Before talking about convergence, it useful to say something about the level of real wages in the old world and in the new. In the old world, wages were relatively low because there was an abundance of labour while in the new world there was a scarcity of labour so that real wages there were relatively high. The question then: what forces were operating during this period to push up the real wages in the old world and/or down in the new world (and to move land rents in the opposite direction)? As many of you said, there were essentially three: 1. Migration, the movement of young, able-bodied, unskilled, mostly male workers from the old world to the new, pushed up the real wage in the old world as the labour force shrank and caused it to decline in the new world as the labour force increased. O’Rourke and Williamson maintain that migration explains most of the convergence during this period – in fact, it over-explains it. 2. The second was commodity market integration, thanks to technological advances in transportation – steam ships, railroads, refrigeration – that substantially reduced the cost of moving goods between the old world and the new and increased the variety and type of goods that could be moved. As a result, natural resources and farm...
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...Description: The Superior Manufacturing Company received a net loss income statement for a good business year (2004). SMC has only 3 products and lots of competitors with similar products. So, price cutting always need a reduction by all the competitors in this industry. The manufacturing strategy of SMC is based on the ‘dedicated factory’, which means each product has its own productive factory. And SMC has a simple cost system. This cost system has 2 categories of costs. First one refers to the costs can be tied directly to the manufacture of specific products. Second one refers to the indirect costs and other costs. Problem and issue: SMC uses a new standard cost system in 2005 which is used to value inventories, prepare budgets, and analyze performance. The manager thinks the product 103 should be dropped for its high cost which could not be cut down, and the product 102 has an increasing demand. Also, the managers want to make a price reduction. However, they find that the costs are too high to support the price reduction. Does the cost system of SMC work effectively? Firstly, we calculate the loss of drop of product 103. We use the data of 2004. If we drop 103, the operating loss would be 4933. Secondly, we calculate the reduction price of product 101. If price of product 101 = 24.5 Profit = 750000*[24.5*(1-1.08%)-10.48]-12.36*996859 = -2004450 If price of product 101 = 22.5 Profit = 1000000*[22.5*(1-1.08%)-10.48]-12.36*996859 = -544000 We can see when the...
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...The story of caterpillar dates back to the late 19th century when Daniel Best and Benjamin Holt each were experimenting with ways to fulfil the promise steam tractors held for farming. Prior to the merger that formed Caterpillar Tractor Co. in 1925, The Hold Manufacturing Company and C.L. Best Tractor Co. had individually pioneered gasoline-powered track type tractors. The first Diesel Sixty Tractor was produced in 1931. By 1940, Caterpillar’s product line had expanded to include motor graders, blade graders, elevating graders and electric generator sets. During World War 1, Holt’s track-type tractors were in great demand by the Allies for pulling and supply wagons through harsh conditions. Troops in World War 2 also relied on Cat equipment, including track-type tractors, motor graders, generator sets and special diesel engines for M4 tanks. The post war period ushered in numerous new products and the company’s first foreign subsidiary. In 1950, the establishment of Caterpillar Tractor Co. Ltd. In Great Britain was the first of many overseas operations created to help manage foreign exchange shortages, tariffs and import controls, and to better serve customer needs around the world. For the same reasons, manufacturing...
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...performance-to date and suggest how they can expand current manufacturing and distribution operations and the institutional challenges that lie ahead. I chose Caterpillar because they are an Illinois company that employs multiple family members of mine. I chose France because my wife is a French teacher and we have visited France multiple times. INTRODUCTION According to The World Factbook, France today is one of the most modern countries in the world and is a leader among European nations. It plays an influential global role as a permanent member of the United Nations Security Council, NATO, the G-8, the G-20, the EU and other multilateral organizations. France rejoined NATO's integrated military command structure in 2009, reversing DE GAULLE's 1966 decision to take French forces out of NATO. Since 1958, it has constructed a hybrid presidential-parliamentary governing system resistant to the instabilities experienced in earlier, more purely parliamentary administrations. In recent decades, its reconciliation and cooperation with Germany have proved central to the economic integration of Europe, including the introduction of a common currency, the euro, in January 1999. Caterpillar was first exposed to France between 100 years ago between 1914 and 1918 during World War I. Benjamin Holt, one of the founding fathers of Holt Manufacturing Company (later to merge with C.L. Best Tractor Company and start Caterpillar Tractor Company which later...
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...CASE STUDY SUMMARY: MARKETING EXCELLENCE CATERPILLAR The steam tractors of the 1890s and early 1900s were extremely heavy, sometimes weighing 1,000 pounds (450 kg) per horsepower, and often sank into the rich, soft earth of the San Joaquin Valley Delta farmland surrounding Stockton, California. Benjamin Holt attempted to fix the problem by increasing the size and width of the wheels up to 7.5 feet (2.3 m) tall and 6 feet (1.8 m) wide, producing a tractor 46 feet (14 m) wide. But this also made the tractors increasingly complex, expensive and difficult to maintain. Caterpillar was founded in 1925 when two California based tractor companies merged. The name “Caterpillar” Company photographer Charles Clements was reported to have observed that the tractor crawled like a Caterpillar, and Holt seized on the metaphor. "Caterpillar it is. That's the name for it!" Some sources, though, attribute this name to British soldiers in July 1907. Two years later Holt sold his first steam-powered tractor crawlers for US$5,500, about US$128,000 today. Each side featured a track frame measured 30 inches (760 mm) high by 42 inches (1,100 mm) wide and was 9 feet (2.7 m) long. The tracks were 3 inches (76 mm) by 4 inches (100 mm) redwood slats. Holt received the first patent for a practical continuous track for use with a tractor on December 7, 1907 for his improved "Traction Engine" ("improvement in vehicles and especially of the traction engine class; and included endless traveling platform...
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...money into stocks (which didn't help them in the long run) others put thier money towards the mills. One mill in Manchester, NH was one of these Gilded Age marvels. Through this era, there was a huge growth of different industries and a wave of immigrants marked this period in history (Morgan, 54). Because of the success of Western expansion, the gold rush in California and resources in Western North America, the demand for railroads led the way for the Gilded Age. The production of iron and steel rose dramatically because of improved technologies in factories and western resources like lumber, gold and silver increased the demand for improved transportation. There were mining operations that led to incredible profits and the owners of companies dealing with these were suddenly swimming in lots of money,many men used these new found riches to invest in the Mills that were in New England at the time. The Mill that is most interesting to me is the Merrimack River Mills in Manchester, NH. Growing up in Manchester only a mile from the mills has made me want to learn the history of this landmark and how the gilded age affected Manchester. In May 1807, Samuel Blodget completed a canal and lock system beside the Merrimack River at Derryfield. His enterprise allowed boats traveling between Concord and Nashua to bypass Amoskeag Falls, opening the region to development. Blodget envisioned here "the Manchester of America," a water-powered textile center comparable to the Industrial Reveloution...
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...Benjamin Holt attempted to fix the problem by increasing the size and width of the wheels up to 7.5 feet (2.3 m) tall and 6 feet (1.8 m) wide, producing a tractor 46 feet (14 m) wide. But this also made the tractors increasingly complex, expensive and difficult to maintain. Another solution considered was to lay a temporary plank road ahead of the steam tractor, but this was time-consuming, expensive, and interfered with earthmoving. Holt thought of wrapping the planks around the wheels. He replaced the wheels on a 40 horsepower (30 kW) Holt steamer, No. 77, with a set of wooden tracks bolted to chains. On Thanksgiving Day, November 24, 1904, he successfully tested the updated machine plowing the soggy delta land of Roberts Island.[10] Company photographer Charles Clements was reported to have observed that the tractor crawled like a caterpillar,[2] and Holt seized on the metaphor. "Caterpillar it is. That's the name for it!"[10] Some sources, though, attribute this name to British soldiers in July 1907.[11] Two years later Holt sold his first steam-powered tractor crawlers for US$5,500, about US$128,000 today. Each side featured a track frame measured 30 inches (760 mm) high by 42 inches (1,100 mm) wide and were 9 feet (2.7 m) long. The tracks were 3 inches (76 mm) by 4 inches (100 mm) redwood slats.[10] Holt received the first patent for a practical continuous track for use with a tractor on December 7, 1907 for his improved "Traction Engine" ("improvement in vehicles, and...
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...Guns Magazine: Loaded... ready... safe! Can your home-defense gun be loaded and quickl... Page 1 of 5 Return to article page This story was printed from LookSmart's FindArticles where you can search and read 3.5 million articles from over 700 publications. http://www.findarticles.com Loaded... ready... safe! Can your home-defense gun be loaded and quickly accessible, yet still be safe? Our handgun editor says "Yes!" and offers several proven strategies. Guns Magazine , Jan 1, 2002, by Massad Ayoob If you keep a gun in your home or workplace, it's only common sense that it be loaded and quickly accessible. The same common sense, however, also tells us the firearm should be inaccessible to children, incompetent adults and unlawful intruders. Having both at once is a tall order, but that doesn't make it impossible. Let's look at a broad spectrum of armed citizens and police officers in this country who have found that when it comes to this important matter -- you can have your cake and eat it too. In The Home John is a detective and gunfight winner who works for a large, West Coast jaw-enforcement agency that serves a very high-crime community. He has investigated a number of violent home invasions, many of which had tragically fatal results. Though most of these were "drug dealer invading and ripping off rival dealer" situations, a disturbing number involved innocent, law-abiding citizens who were helpless once their doors were kicked in. When John gets dressed for work in the...
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...Question 1 Answer Based off of the 2004 statement of profit and loss data, I do agree with Water’s decision in keeping product 103. The total sunk costs for the company could be more substantial in a shorter time than having years of low profits from the sales of product 103. Overall the company would lose $4,933,000 by eliminating product 103. Recovering the indirect costs of dropping the product line would also be unclear as well. An incremental analysis would be the best approach in determining whether keeping product 103 is beneficial or not. Continue Drop Difference ***(Thousands $)*** Sales $ 26,670 0 -26,670 Less-Variable Expense Compensation Insurance 458 0 458 Direct Labor 6,879 0 6,879 Materials 4,851 0 4,851 Supplies 350 0 350 Repairs 104 0 104 Power 302 0 302 Total Variable Expense 12,944 12,944 Contribution Margin 13,726 -13,726 Less-Fixed Expenses Rent 1,882 1,882 0 Property Taxes 401 401 0 Property Insurance 534 534 0 Indirect Labor 2...
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...Introduction Superior Manufacturing Company is a company that had a loss of $688,000 in 2004. Manufacturing products 101, 102, and 103, cost analysis shows that products 102, and 103 have been unprofitable. SMC is also a company that has many competitors with products that are very similar so raising prices would cause customers to search for alternatives. The dominant competitor, Samra Company has been the cost regulator in the market by setting prices to be matched by competition. The manufacturing process uses three horizontally integrated dedicated factories that do not typically operate at capacity. Superior Manufacturing Company also uses a standard value costing method that is based on past performance. Decision to keep Product 103 Continuing production vs. Stopping production assumptions * Continue to pay fixed costs, not sell machinery immediately, and cut power to the building * Immediately reduce all direct labour costs, and reduce indirect labour costs to 5% for administration involving the property Table 1 (In thousands $) | Continue Production | Stop Production | Rent | $ 1,882 | $ 1,882 | Property Taxes | $ 401 | $ 401 | Property Insurance | $ 534 | $ 534 | Compensation Insurance | $ 458 | $ 5.77 | Direct Labour | $ 6,879 | | Indirect Labour | $ 2,309 | $ 115.45 | Power | $ 302 | | Light and Heat | $ 106 | | Building Service | $ 75 | | Materials | $ 4,851 | | Supplies | $ 350 | | Repairs | $ 104 | | Total | $ 18,249...
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...JAMES W. CULLITON DAVID F. HAWKINS JACOB COHEN Superior Manufacturing Company New Management Do No Upon taking office in February 2005, Waters decided against immediate major changes. Rather, he chose to analyze 2004 operations and to wait to see results for the first half of 2005. He instructed the accounting department to provide detailed expenses and earnings statements by products and departments for 2004 (see Exhibit 2). In addition, he requested an explanation of the nature of the company’s costs including their expected future behavior (see Exhibit 3). Company and Industry The Superior Manufacturing Company made only three industrial products: 101, 102, and 103. They were sold by the company’s sales force for use in the processes of other manufacturers. All of the sales force, on a salary basis, sold the three products but in varying proportions. Superior sold ________________________________________________________________________________________________________________ Professor James W. Culliton prepared the original version of this case, HBS No. 156-004. This version was prepared by Professor David F. Hawkins and Jacob Cohen, Affiliate Professor of Accounting and Control at INSEAD. HBS cases are developed solely as the basis for class discussion. The company mentioned in the case is fictional. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2004 President...
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