IMA大赛案例分析.ppt

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1、Great Plains Capital (PE)Fine Foods Inc. (US)Fine Foods Canada, Ltd.Other importersSMU1SMU2(Smith)SMU3Super markets & similar outletsInstitutional Customers Special ordersGovernmental Organizations, etc.Product MPTop ManagementR&DFinanceHuman ResourceSupply ChainManagementITIntroductionOutlineCase o

2、verviewProduct CostingSpecial OrdersPerformance EvaluationConclusion & Recommendations Case OverviewPerformance evaluationproblemNon-financial indexFinancial indexProduct costing allocationPerformance evaluation methodUnreasonable cost allocation will lead toThe influence of the unreasonable cost al

3、locationA Enterprise pricing is not reason-ableB Product profitability is difficult to estimateC The error of production decision- making D Performan-ce evaluationtwo main problems in the cost allocationall costs allocate to its products cannot get a accurate measure of each products profitabilityth

4、e way of cost allocation(distribute by weight) is too simpledirect calculated costs ：Raw material, packaging material, and direct production salariesSo, the cost cant cover all the incalculable costAnalysis point 1Variable manufacturing costs:Electricity, steam, water, and warehouse Costs，other inca

5、lculable costs(such as spoilage).Spoilage can be normal or abnormal.Normal Spoilage can be part of the cost of operation and therefore is part of the cost of good units produced.Abnormal spoilage is allocated to a loss from abnormal account.The freight cost is not irrelevant and should be allocated

6、to the period cost (selling expenses). Analysis point 2:For the product (MP), The estimated freight cost is allocated based on the weight of product and is included in the sales price. Besides, the Fine Foods pays the freight.Media and sales promotion costs are sell-ing expenses, which belongs to pe

7、riod cost. So including them in the product cost is unreasonable. Analysis point 3:Media and sales promotion costs for SMU1 and SMU2 are allocated to product groups and to individual products ba-sed on weight of product sold.Analysis point 4:Similarly, sales and marketing costs also should be the pe

8、riod cost ,which is allocated to products based on sales volume previously.Analysis point 5:Costs for top management, business administration ,IT, HR, supply management, and logistics are allocated to the cost centers and then equally to each product.These costs are allocated to the product ,which h

9、as the very big hidden trouble, For instance ,the management can have a luxurious life and passed them on to the cost of products. Analysis point 1 the costs (steam boilers, building maintenance)are allocated directly to products using net weight or gross weight is absurd.Analysis point 2If the allo

10、cation of remaining factory costs is a fixed percentage, then allocation to products is based on production time .It hard to say just by production time ,the cost can be allocated appropriately.We recommend the volume of production may be a better standard of distribution which is more relevant.This

11、 kind of cost calculation method allocates indirect costs to pro-ducts with different complexity according to the same standards, which is not appropriate.While activitybased costing method shows its ad-vantage.ResourcesActivityActivity Driver labor costoffice rents Related management cost packaging

12、 purchase the number of laborers labor costfuel costs Vehicle depreciation cost packaging transportthe number of laborers transport mileage goods weight labor costwater and electricity costs rent packaging storage the number of laborers packaging valuelabor costwater and electricity costs packaging

13、equipment depreciation subsidiary materials cost rent packaging operation the number of laborers asset value area of packaging materials Packaging operations center Through the above analysis There are many unreasonable factors in the current product costing approaches.Especially ,its unfair for the

14、 product dense, bulky, and heavy ,such as MP. So, Lets have a in-depth analysis of special order (virtually all product MP )Special OrdersvSpecial Orders is one in which the contract specifies that it can be rejected within one year before delivery; otherwise it isnt special. Benefits orderscontrol

15、channel of distribution and seize the market opportunities.take full advantage off lexible production Capacity.Loss of some normal ordersDefault cost Occupation of capital1.warehouse cost of materials and product2.disturb production design3.idle production capacity1.Decrease the liquidity of cash 2

16、opportunity cost processBy ProductsRaw materialIts proper to make a decision by contribution margin, but SMU2 didnt consider all the factors when using this methodFirstly, fixed manufacturing cost should not be considered in decision-makingSecondly, default cost should be amortized when accepting sp

17、ecial orders;Thirdly, special orders were not handled specially.RecommendationsvJIT (Just In Time)vPromote consumer preferenceTypes of responsibility centerscost centerRevenue center is responsible for sales not for the manufacturing costs of the sales.Cost center is a department that generates litt

18、le or no revenue. A department is responsible for minimizing costs while maintaining an expected level of quality.revenue centerinvestment centerprofit centerTerms and definitions 1Terms and definitions 1Profit center is responsible for both costs and revenues so as to get a good profit.Investment c

19、enter is responsible for investments, costs, and revenues in their department.Contribution margin= revenues variable expensesControllable profit= contribution margin- controllable fixed costsIncome before taxes=Revenues-all costs for a business unit other than taxes including some costs that are not

20、 under the managers controlComputation methods of indicators evaluate performance:Terms and definitions 2Terms and definitions 2The importance of a companys strategyIn China, we often say “Making a plan before your action contributing to success, or youll lose”. As to a company, realizing its strate

21、gy is of the utmost importance . After talking about the case, our team believes that when evaluating managers performance we should consider their contribution to realizing the strategy. The roles of the companys performance evaluationPerformance evaluation should be related with the realizing of a

22、 companys strategy. If manager make a big contribution to a companys strategy then he should get a high score and salary.Fine Foods Responsibility centersInvestment centerCost center Profit center1Profit center 2Profit center 3 Fine Food CanadaSome productsSMUs are profit centersSMUs can manager the

23、ir profit and some expensesAgency Costs in Fine Food Top management transfer their agency costs when evaluating performance, some costs are unfairly assigned to SMUs. As a result, we cant evaluate top management properly and many agency costs are bared by SMUs managers. Top managementManagers of SMU

24、sAgency costsFine foods Performance evaluationCM1CM2CM3CM4Operating ProfitFour contribution margins and Operating Profit Operating ProfitAny problems?PWH Gross sales(Standard discounts)(Activity discounts)(Special discount activities for customers)Net sales(Variable manufacturing cost)(Fixed manufac

25、turing cost)(Freight out)(Media)(Sales promotion)CM1(Media)(Sales promotion)CM2(Marketing and sales)CM3(Top management)(Business administration)(Information system)(Human resources)(Supply chain)(Production)(External logistics for finished goods)(Markup - Manufacture expenditures)(Other fixed costs)

26、CM4(Structural costs)(Total depreciation)Common expenses cant be controlled by SMUs managers.1.High sales revenue may be followed with high bad debt ratio.2.Some indispensible expenses may be cut down.3.External environment may influence the performance of SMUs managers. 4.Financial measures cant ev

27、aluate managers hard work on raising the developing potential of the company.Problems?Operating profit is not applicable Operating profit includes some uncontrollable elementsCM4 are not reasonable BSCFinancial measures are only the tip of an icebergWhy? How?BSCFine foods Performance evaluationBSCBS

28、CInvestment centerCost center Profit center 1Profit center 2Profit center 3Fine Foods Responsibility centersWhats our recommendation?BSCBalanced score cardStrategygoals goalsgoalsgoalsStrategy should be detailed into goalsFine Food CanadaSome productsFinancialCustomerInternal business processLearnin

29、g and growthBad debt ratioliquidityCM3Customer retentionCustomer acquisitionCustomer satisfactionQuick reactionEnough stockStock checking FrequencyGood service and other sales skillsNew productTeam performanceFactorsCritical Success factorsFinancial measureIs only one factor when evaluating managers performance. Good performance here is not enough to speak highly of a managerNon-financial measures are equally important to financial measuresExplanationConclusion & RecommendationsProducts cost is a symptomBalanced Score CardActivity-based costingPerformance evaluation is a problem