# This is a solution for Kanthal (Harvard Business Case Study)

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Kanthal Case Study Solutions

INTRODUCTION:

Kanthal is company that specializes in the production and sales of electrical resistance heating elements. Kanthal has about 10,000 customers and they produce about 15,000 items. The company consists of three divisions and these three divisions are as follows:

1)Kanthal Heating Technology - 25% global market share

2)Kanthal Furnace Products - 40% global market share

3)Kanthal Bimetals - Manufacturer of one of the few fully integrated temperature control devices

Mr. Ridderstrale, who became the President of the company in 1985, developed and

implemented a plan that has involved completely changing and over-hauling their pre-existing traditional cost system. The new plan has been installed
Non-stocked products have additional costs associated with processing orders that went above and beyond the costs associated with a stocked product. The third step involved determining what the S&A allocation factor would be for calculating the S&A volume related costs. This allocation factor would then be applied to manufacturing COGS. The fourth and final step involved the calculation of the operating profit based on backing out volume related costs from sales revenues followed by deducting S&A and manufacturing order costs from the resulting gross margin to arrive at a operating profit.

Question 3:

Consider a product line with 50% gross margins (after subtracting volume-related expenses from 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.

a). Compare the operating profits and profit margins of two small orders, both for SEK 2,000. One order is for a stocked item, and the other order is for a non-stocked item.

b).Compare the operating profits and profit margins for two large customers.

Customers A & B both purchased SEK 160,000 worth of products this year.

Customer A placed just three orders, for three different non-stocked items.

Customer B placed 28 orders, 6 for stocked items and 22 for non-stocked items.

The calculations used for this