Seligram, Inc.: Electronic Testing Operations

Measuring Product Costs

Case: Seligram, Inc.: Electronic Testing Operations

Case Description: Explores the obsolescence of a cost system when technology changes. In particular, it asks students to increase the number of cost centers and allocation bases. The firm moves from a one-center, direct labor-hour system to a three-center, direct labor-hour and machine-hour systems. In addition, the case demonstrates how cost systems can induce subtle and not so subtle shifts in the strategy of the firm. In particular, we see how certain businesses are made to look inappropriately attractive or unattractive.

Cost Behavior, Capacity Analysis and the Downward Demand Spiral

Case: Bridgeton Industries: Automotive Component & Fabrication Plant

Case Description: Bridgeton Industries was experiencing reduced sales. To become more competitive it introduced a classification procedure for products based upon their productivity and other factors. Products were classified into three groups: world class, potentially world class, and non-world class. The firm outsources the non-world class products. This outsourcing causes the costs on the remaining products to increase because some fixed costs associated with the outsourced products did not go away. These residual costs caused more products to become non-world class and hence candidates for outsourcing. The firm has entered the death spiral.

Activity-Based Costing

Case: Destin Brass Products Co.

Case Description: A specialized manufacturer of brass valves, pumps, and flow controllers is troubled by competitive pricing in pumps and higher than expected margins for flow controllers. Managers' are increasingly questioning whether they know the true manufacturing costs of its products, and suspect that cost accounting and cost allocations to products may be to blame. Two volume-based systems are described and illustrated. The case requires students to develop activity-based costs for comparison and then decide which system is most useful to company managers.

Business Decisions

Case: Salem Telephone Company

Case Description: An independent regulated telephone company has established a computer services subsidiary that has not lived up to expectations. Managers must determine whether it is profitable or not and consider changes in pricing or promotion that might improve profitability. The teaching purpose is to introduce concepts of relevant costs, contribution, and breakeven analysis.

Operating Decisions

Case: Superior Manufacturing Company

Case Description: A professional manager is hired by a small manufacturing company after the president discovers that he has made poor decisions. One product appears to be unprofitable, whereas the product sold in highest volume is under competitive price pressure. A crude cost accounting system fails to reveal appropriate actions to correct problems. The case uses information on cost behavior, relevance of allocated costs, contribution margin and variances to explain the nature of cost accounting.

Profit Planning and Budgeting

Case: Cafes Monte Bianco: Building a Profit Plan

Case Description: The case presents the profit plan as a tool to quantify strategic alternatives. Using projected