superior manufacturing company
CONTENTS
Analysis of the case 2
Q1) Do you agree with Walters decision to keep product 103? 3
Analysis of Profit and loss statement 4
Sensitivity analysis 6
Strategic scenarios 8
Q2) Should superior lower as of January 1, 2006 its prices of product 101? To what price? 10
Q3) why did Supreme improve profitability during the period of January 1 to June 30, 2005? 13
Analysis 14
Q4) why is it important that Superior has an effective cost system? 17
What is your overall appraisal of the company’s cost system and its use in report to management 18
List the strengths and weaknesses of the system and its related reports for the purpose management uses the system’s output 18
What recommendations, if any, would you make to waters regarding the company’s cost accounting system and its related reports? 19
Initial Analysis of Superior Manufacturing Company Case :-
1) After death of Richard Harvey (2004), founder and president of Superior Manufacturing Company (SMC), Paul Harvey took over. Paul Harvey had only 4 years of experience. Soon followed serious management problems because of some bad decisions made by Paul Harvey. The income statement of 2004 reflected net loss of $0.68million in a good business year. To solve this problem Herbert Waters was brought over as General Manager of SMC.
2) SMC manufactured 3 different products namely 101, 102, 103 and was among the top 8 companies in the industry. Samra Company was market leader and announced price annually and other follow. Due to no product differentiation price cut was not an option. The June 2004 market share of SMC product wise is given below;
Products
101
102
103
Market share
12%
8%
10%
Price per 100lbs
24.5
25.8
27.5
3) SMC had a dedicated factory concept, where each factory produces only one product. Each product factory was fully horizontally integrated. SMC all plants operated below capacity.
4) SMC followed a simple cost system, which identified two categories of cost :-
a.
Analysis of the case 2
Q1) Do you agree with Walters decision to keep product 103? 3
Analysis of Profit and loss statement 4
Sensitivity analysis 6
Strategic scenarios 8
Q2) Should superior lower as of January 1, 2006 its prices of product 101? To what price? 10
Q3) why did Supreme improve profitability during the period of January 1 to June 30, 2005? 13
Analysis 14
Q4) why is it important that Superior has an effective cost system? 17
What is your overall appraisal of the company’s cost system and its use in report to management 18
List the strengths and weaknesses of the system and its related reports for the purpose management uses the system’s output 18
What recommendations, if any, would you make to waters regarding the company’s cost accounting system and its related reports? 19
Initial Analysis of Superior Manufacturing Company Case :-
1) After death of Richard Harvey (2004), founder and president of Superior Manufacturing Company (SMC), Paul Harvey took over. Paul Harvey had only 4 years of experience. Soon followed serious management problems because of some bad decisions made by Paul Harvey. The income statement of 2004 reflected net loss of $0.68million in a good business year. To solve this problem Herbert Waters was brought over as General Manager of SMC.
2) SMC manufactured 3 different products namely 101, 102, 103 and was among the top 8 companies in the industry. Samra Company was market leader and announced price annually and other follow. Due to no product differentiation price cut was not an option. The June 2004 market share of SMC product wise is given below;
Products
101
102
103
Market share
12%
8%
10%
Price per 100lbs
24.5
25.8
27.5
3) SMC had a dedicated factory concept, where each factory produces only one product. Each product factory was fully horizontally integrated. SMC all plants operated below capacity.
4) SMC followed a simple cost system, which identified two categories of cost :-
a.