Busn Simulation Case
JOhnson beverage inc | Johnson Beverage Inc | Case Analysis | | Holly Redden, Claudia Nunez | 11/7/2012 |
An in depth analysis of the current costing methods used by the beverage distribution company, Johnson Beverage Inc. |
Table of Contents:
Executive Summary…………………………………………………………………………………………………………………………………1
Problem Statement………………………………………………………………………………………………………………………………...1
Analysis …………………………………………………………………………………………………………………………………………………..1
Impact Analysis ………….…………………………………………………………………………………………………………………………..2
Criteria for an Effective Solution ………………………………………………………………………………………………………….….3
Evaluation of Alternatives ……………………………………………………………………………………………………………………….3
Recommendation ……………………………………………………………………………………………………………………………………4 Action Plan………………..……………………………………………………………………………………………………………………………5
Appendix…………………………………………………………………………………………………………………………………………………6
Executive Summary:
The problem facing your company is the current method of allocating costs based on revenue is not accurately reflecting customer profitability. If you don’t address this problem in a timely matter you are going to lose your most profitable customers while retaining customers who are in fact costing you money. This will ultimately result in bankruptcy or insolvency, meaning the end of Johnson Beverage Inc. I recommend that you adopt an Activity Based Costing method, establish multiple cost pools and their individual cost drivers and allocate customer service costs based on that method. This will more accurately predict profitability and future customer potential allowing your company to offer competitive pricing and retain long-term customers.
Problem Statement:
The problem is the current cost allocation method does not accurately reflect profitability.
Analysis:
Johnson Beverage Inc’s revenues for the past year totalled 12 million dollars, with a customer base of approximately 20. Previous ability to retain Saver Superstore, one of the largest and
An in depth analysis of the current costing methods used by the beverage distribution company, Johnson Beverage Inc. |
Table of Contents:
Executive Summary…………………………………………………………………………………………………………………………………1
Problem Statement………………………………………………………………………………………………………………………………...1
Analysis …………………………………………………………………………………………………………………………………………………..1
Impact Analysis ………….…………………………………………………………………………………………………………………………..2
Criteria for an Effective Solution ………………………………………………………………………………………………………….….3
Evaluation of Alternatives ……………………………………………………………………………………………………………………….3
Recommendation ……………………………………………………………………………………………………………………………………4 Action Plan………………..……………………………………………………………………………………………………………………………5
Appendix…………………………………………………………………………………………………………………………………………………6
Executive Summary:
The problem facing your company is the current method of allocating costs based on revenue is not accurately reflecting customer profitability. If you don’t address this problem in a timely matter you are going to lose your most profitable customers while retaining customers who are in fact costing you money. This will ultimately result in bankruptcy or insolvency, meaning the end of Johnson Beverage Inc. I recommend that you adopt an Activity Based Costing method, establish multiple cost pools and their individual cost drivers and allocate customer service costs based on that method. This will more accurately predict profitability and future customer potential allowing your company to offer competitive pricing and retain long-term customers.
Problem Statement:
The problem is the current cost allocation method does not accurately reflect profitability.
Analysis:
Johnson Beverage Inc’s revenues for the past year totalled 12 million dollars, with a customer base of approximately 20. Previous ability to retain Saver Superstore, one of the largest and