Zumwald Case

1259 WordsJul 28, 20116 Pages
Zumwald AG Management Accounting Background: Zumwald AG, headquartered in Cologne, Germany, produced and sold a range of medical diagnostic imaging systems and biomedical test equipment and instrumentation. The company was organized into six operating divisions. Total annual revenues were slightly more than €3 billion. Zumwald manages ran the company on a highly decentralized basis. The managers of each division were allowed considerable autonomy if their performances were at least on plan. Performance was evaluated, and management bonuses were assigned, based on each division’s achievement of budgeted targets for return on invested capital (ROIC) and sales growth. Even though the company was partly vertically integrated,…show more content…
He should’ve considered that this assistantship does not mean that ISD will buy the display from them at any price quote. The other option that Heidelberg might consider to bring down the cost is: looking for source other than ECD, or asking ECD to lower down their price, but I doubt this would bring down much of the cost. c. The Electronic Components Division? ECD was originally established as a captive supplier to other Zumwald divisions, so in this case eventhough ECD could quote price based on their relevant cost, and still make a contribution, but it has established that internal pricing policy of full manufacturing cost + 20% mark up. Overruling this policy for a 5% business could jeopardize ECD policy. zumwald other 5 division could ask the same from ECD d. Zumwald AG? In the perspective of overall Zumwald AG, I would say is better off if Heidelberg supplying to ISD, considering Heidelberg and ECD are not working in full capacity. Looking at analysis 2, Zumwald could get a contribution margin of €90,000 from Heidelberg and €12,600 from ECD, which is a total of €102,600. This is can be foregone if ISD order from Display tech. In a sense, for Zumwald as a whole, getting it vertically integrated would be better off, since opening a new market that can absorb most of the internal sourcing would

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