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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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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 13, Problem 13E
Textbook Problem
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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:

  1. a. Improve the soldering capabilities by sending employees to an outside course.
  2. b. Redesign the insertion process to eliminate some of the common mistakes.
  3. c. Improve the procurement process by selecting suppliers that provide higher-quality circuit boards.

Required:

  1. 1. State the revenue growth and cost reduction strategy using a series of cause-and-effect relationships expressed as if-then statements.
  2. 2. Illustrate the strategy using a strategy map.
  3. 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.

1.

To determine

State the revenue growth and cost reduction strategy using a series of cause-and-effect relationships expresses as if-then statements.

Explanation of Solution

Balanced Scorecard: Balanced scorecard is a management and planning strategy for organizational processes of defining the goals to be achieved, allocation of daily assignments on the basis of strategy, alignment of the projects on the basis of their priority and watchdog roles for its respective progress and achieving desired targets. Even though balances scorecards change from one firm to another firm, most have a combination of customer measures, measures of learning and growth, financial measures and internal business process measures.

Strategy Translation: Strategy translation is the practice of “specifying objectives, measures, targets, and initiatives” for each individual perspective. Strategic focus is created by translating the organizations’ strategy into “operational objectives and performance measures” for four different perspectives...

2.

To determine

Illustrate the strategy used by using a strategy map.

3.

To determine

Explain the manner in which revenue growth strategy can be tested, discuss the role of lead and lag measures, targets, and double-loop feedback.

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Chapter 13 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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