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Tbm Tijuana Broze Machining

In: Business and Management

Submitted By 5abi
Words 1505
Pages 7
Tijuana Bronze Machining
A Managerial Accounting Analysis of TBM

Table of Contents Introduction 3 Current Strategic Issues Facing the Firm 3 Traditional System – Costing 3 Modern View Costing 4 ABC Costing 5 Comparison/Conclusion 6 Recommendations 7

Tijuana Bronze Machining (TBM) is a company which specializes in the manufacturing of bronze valves, pumps and flow controllers. Management at TBA is having difficulties understanding the natures of the pump and flow controller pricings, the problem, it seemed, was hidden within their method of cost accounting. The firm was currently taking a “traditional” approach to cost accounting, in which overhead costs are assigned to production on the basis of production-run labour costs. But as Les Paul learned at the conference perhaps the traditional approach was corrupt and needed revision, since costs are a product of activity (Activity based costing).
Current Strategic Issues Facing the Firm
TBM produces three independent products: Valves, pumps and flow controllers.
Valves which brought in 24% of the revenues were seemingly doing good based on the traditional cost accounting system; they were bringing in the targeted price and management was happy with the valve deployment and accounting.
Pumps, on the other hand, created a sense of doubt for management; they were baffled at the low price being forced by the market on pumps. The pump market seems to be a fairly large market with strong competition; this is exhibited in that fact that pumps account for 55% of revenues while only having a 22% gross margin. The actual gross margin was far below the targeted gross margin of 35%. Could the problem be the accounting system? Or is the market really that fierce?
Conversely flow controllers offers the opposite problem, TBM is finding a lack of resistance by customers on the raising of flow...

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