Bridgeton Case Essay

957 Words May 9th, 2013 4 Pages
1. The objective of the strategic analysis was to identify which products were world-class in terms of “competitive position and potential,” products which could become world-class, and products which have no hope of becoming world-class. a. Do you think the strategic analysis, as described in the case, achieved its objective? Explain.
Answer: The strategic analysis, as described in the case did achieve its objective of identifying and classifying the products in terms of competitive position and potential. Although the data used for this analysis - specifically the overhead cost data, seems to be based on incorrect cost allocation method and might have led to wrong classification of the products. b. What are the potential
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d. How much overhead cost do you think Bridgeton and the consultants implicitly assumed they would save by outsourcing these two products?
Answer: It seems like Bridgeton and its consultants assumed that the savings from outsourcing those two products would be 435% of the direct labor dollar cost for those products - calculated amount $53,496.
435% being the overhead rate calculated for the whole pool, at budget time for the model year. e. From the 1989 budget (exhibit 2), how much overhead cost do you think was actually saved by outsourcing muffler-exhaust systems and oil pans?
Answer: Comparing the direct labor and overhead costs from 1988 and 1989 the actual savings were 270% (as detailed in Table 1)

Table 1 | Direct Labor Cost | Total Overhead Cost | 1988 | $25,294.00 | $109,890.00 | 1989 | $13,537.00 | $78,157.00 | Difference | $11,757.00 | $31,733.00 | Percentage Savings | (overhead diff/ labor diff) | 270% |

3. For each of the individual overhead accounts at Bridgeton, do you believe the given cost is variable, fixed, or something else? Why? (Use information or evidence from the case to support your evaluation, if possible. For most of these costs, there is no single right answer from the case information, so the goal is to come up with a reasonable estimate.)
I calculated the %age

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