EBK CORNERSTONES OF COST MANAGEMENT
4th Edition
ISBN: 8220103648561
Author: MOWEN
Publisher: Cengage Learning US
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Textbook Question
Chapter 13, Problem 13E
Bannister Company, an electronics firm, buys circuit boards and manually inserts various electronic devices into the printed circuit board. Bannister sells its products to original equipment manufacturers. Profits for the last two years have been less than expected. Mandy Confer, owner of Bannister, was convinced that her firm needed to adopt a revenue growth and cost reduction strategy to increase overall profits.
After a careful review of her firm’s condition, Mandy realized that the main obstacle for increasing revenues and reducing costs was the high defect rate of her products (a 6 percent reject rate). She was certain that revenues would grow if the defect rate was reduced dramatically. Costs would also decline as there would be fewer rejects and less rework. By decreasing the defect rate, customer satisfaction would increase, causing, in turn, an increase in market share. Mandy also felt that the following actions were needed to help ensure the success of the revenue growth and cost reduction strategy:
- a. Improve the soldering capabilities by sending employees to an outside course.
- b. Redesign the insertion process to eliminate some of the common mistakes.
- c. Improve the procurement process by selecting suppliers that provide higher-quality circuit boards.
Required:
- 1. State the revenue growth and cost reduction strategy using a series of cause-and-effect relationships expressed as if-then statements.
- 2. Illustrate the strategy using a strategy map.
- 3. Explain how the revenue growth strategy can be tested. In your explanation, discuss the role of lead and lag measures, targets, and double-loop feedback.
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Chapter 13 Solutions
EBK CORNERSTONES OF COST MANAGEMENT
Ch. 13 - Describe a strategic-based responsibility...Ch. 13 - What is a Balanced Scorecard?Ch. 13 - What is meant by balanced measures?Ch. 13 - Prob. 4DQCh. 13 - Prob. 5DQCh. 13 - What are stretch targets? What is their strategic...Ch. 13 - Prob. 7DQCh. 13 - What are the three strategic themes of the...Ch. 13 - Prob. 9DQCh. 13 - Explain what is meant by the long wave and the...
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At the end of 20x3, two years after the turnaround quality strategy was implemented, Maria received the following quality cost report: Maria also received an income statement for 20x3: Maria was pleased with the outcomes. Revenues had grown, and costs had been reduced by at least as much as she had projected for the two-year period. Growth next year should be even greater as she was beginning to observe a favorable effect from the higher-quality products. Also, further quality cost reductions should materialize as incoming inspections were showing much higher-quality purchased components. Required: 1. Identify the strategic objectives, classified by the Balanced Scorecard perspective. Next, suggest measures for each objective. 2. Using the results from Requirement 1, describe Marias strategy using a series of if-then statements. Next, prepare a strategy map. 3. Explain how you would evaluate the success of the quality-driven turnaround strategy. What additional information would you like to have for this evaluation? 4. Explain why Maria felt that the Balanced Scorecard would increase the likelihood that the turnaround strategy would actually produce good financial outcomes. 5. Advise Maria on how to encourage her employees to align their actions and behavior with the turnaround strategy.arrow_forward
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