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problem: Identify what are likely to be variable costs for an airline such as Southwest Air. Also, what are likely to be the fixed costs?

problem: Identify what are likely to be variable costs for a movie theatre. Also, what are likely to be the fixed costs?

problem: Identify what are likely to be variable costs for a brewery such as Molson or Budweiser. Also, what are likely to be the fixed costs?

problem: Lucas Diving Supplies Company, in its first year of business, had labor costs of $66,000, overhead costs of $98,000, materials purchases of $22,000 and an ending inventory of materials and work-in-process inventories of $1,000 and $2,000 respectively. What is the amount of cost of goods manufactured in the first year of operations?

problem: Navigating the various Web sites for low fares, avoiding fees for checked bags and priority seating, and finding the right flight schedule can be a real challenge for the average airline passenger. The complexity of options and sources for purchasing a ticket has expanded significantly in recent years. And the outlook is for more complexity, as new search sites (Google, Hipmunk…) become available and as some airlines are seeking more control over where and how tickets on their flights are purchased. According to Forrester Research, an independent research company, the airlines want passengers to buy tickets based on value and not on low prices. They do not want passengers to comparison shop.  For ex, American Airlines recently announced that it wanted to deliver fare information directly to customers and to bypass search systems such as Expedia or Travelocity.


a) describe why you think competition in the airline industry is a cost leadership or a differentiated type of competition. 
b) Give an ex or two of how you think the complexity of fares and fees in the airline industry affects the sales and costs of the airlines.

problem: Zeller Manufacturing Company produces four lines of high-quality lighting fixtures in a single manufacturing plant. Products are built to specific customer specifications. All products are made-to-order. Management of the plant lists the following as the key activities at the plant:

1) Product design.
2) Product testing.
3) Developing marketing plan for new product.
4) Purchasing, receiving, and inspecting materials for production.
5) Manufacturing labor.
6) Setups for machine.
7) Product inspection, done for each product before packaging for shipment.
8) Packaging and shipping.
9) Sales calls for potential customers.
10) Processing customer orders.
11) Maintenance of plant and equipment.
12) Plant security.


Identify a cost object and a cost driver for each and every activity.

problem: Zipcar ( is a car sharing club founded in Cambridge, MA in 1999.  The club members pay an annual fee and then have the opportunity to rent a small car (usually a sub-compact; the models include the Toyota Prius) for a fixed hourly rate. Zipcar is located largely in select metropolitan areas such as Boston, San Francisco, and Washington D.C.   Members, called “Zipsters” make reservations for a car on the Zipcar website, and then use an access card to open the vehicle.  The vehicle has a “home base” parking spot where the driver picks up and returns the vehicle.  The club grew by 80% in 2007 and has great plans for the future, subject to potential competition from the existing car rental companies such as Hertz and Enterprise.


1) What are the fixed and variable costs for Zipcar?
2) What are some of the competitive advantages and challenges of the Zipcar concept?

problem: Assume that you are a consultant for a start-up Internet retailer,, which provides a variety of bicycle parts and accessories in a convenient and effective customer service approach. The firm operates from an office building and nearby warehouse located in Danville, Virginia. Currently, the firm has 10 permanent administrative staff, 6 customer service representatives who respond to customer inquiries, and 12 employees who pick, pack, and ship customer orders. All orders are placed over the firm’s website. An 800 telephone number is available for customer service. The firm’s sales increased at about 20 percent per year in the last two years, a decline from the 50 percent rate in its first three years of operation. Management is concerned that the decline will delay the firm’s first expected profit, which had been projected to occur in the next two years. The firm is privately held and has been financed with a combination of bank loans, personal investments of top managers, and venture capital funding.


What specific executional cost drivers are important in this business? How should the firm use them to improve its sales rate?

problem: Hamilton Company produces women’s clothing. During 2013, the company incurred the following costs:

1336_company cost.jpg

Inventories for the year were as follows:



1) Prepare a statement of cost of goods manufactured.
2) find out cost of goods sold.

problem: As firms move to the Internet for sales and customer service, how do you expect their competitive strategies will change?

problem: What would you consider to be the strategy of The Coca-Cola Company, cost leadership or differentiation, and why?

problem: Strategy; Calvin Klein For many, the name Calvin Klein (CK) is synonymous with high-fashion clothing and accessories, super models, and fashion shows. It has an image of quality and style. In reality, a significant amount of CK products are sold by discount retailers such as Costco. How can this be? The answer is that the designer Calvin Klein licensed Warnaco Group and other manufacturers to produce his products. Under this arrangement, CK receives a royalty based on Warnaco’s sales. As it turns out, Warnaco found that it could be more successful with the brand through a broad strategy involving a number of retailers, including discounters.


What type of strategy (cost leadership or differentiation) is Calvin Klein following at this time? Comment on how effective you think the relationship with Warnaco is likely to be.

problem: Banking, Strategy; Skills  A large U.S.–based commercial bank with global operations recently initiated a new program for recruiting recent college graduates into the financial function of the bank. These new hires will initially be involved in a variety of financial functions, including trans-actions processing, control, risk management, business performance reporting, new business analysis, and financial analysis. Recognizing that they are competing with many other banks for the relatively small number of qualified graduates, the bank has assigned you to develop a skills statement to be used in college recruiting as well as an in-house training program for new hires. You have some old training manuals and recruiting guides to assist you, but your boss advises you not to use them but to start with a fresh page. The reason for developing new materials is that the bank recently reorganized based on new management methods.


1) Briefly describe 8 to 10 critical success factors for this bank. Consider how a bank of this size remains competitive and successful.

2) Develop a one-page outline of the skills statement and training program that your boss requested.

Be brief and specific about the proper job description of a new employee in the finance area of the bank. What is the role of professional ethics, if any, in the job description? Hint: Use a balanced scorecard approach.

problem: Strategy; Auto Tire Manufacturing Michelin, the 121-year-old French manufacturer of tires, is a worldwide leader in tire sales. But there are plenty of challenges. One is the growth of low-cost tire producers in Southeast Asia and elsewhere. Michelin knows that most tire buyers are shop-ping primarily for price, viewing tires primarily as a commodity. This is true even though the Problems at some tire makers in recent years have brought consumer attention to tire safety. To help differentiate his firm’s product, Edouard Michelin (Michelin’s former CEO) pushed development of technologically advanced tires that, for ex, provide blowout protection and are more suited for high-performance use.


Is the auto tire a commodity? Would you consider Michelin to be a cost leader or a differentiator and why?

problem: How are the four strategic ---SWOT analysis, execution, the value chain, and the balanced scorecard----linked in a comprehensive strategic analysis?

problem: Identify four or five potential critical success factors for a small chain of retail jeweler stores?

problem: What are some of the key issues to consider in effectively implementation a balanced scorecard?

problem: Joel Deaine, CEO of Deaine Enterprises, Inc. (DEI), is considering a special offer to manufacture a new line of women’s clothing for a large department store chain. DEI has specialized in designer women’s clothing sold in small, upscale retail clothing stores throughout the country. To protect the very elite brand image, DEI has not sold clothing to the large department stores. The current offer, however, might be too good to turn down. The department store is willing to commit to a large order, which would be very profitable to DEI, and the order would be renewed automatically for two more years, presumably to continue after that point.


1) Determine Joel’s competitive strategy (cost leadership or differentiation) and use this strategy to analyze the choice Joel faces.
2) describe two means Joel can use to implement his strategy.

problem: Harley-Davidson Inc. (HD) is one of the most recognized brands worldwide. The motorcycle manufacturer has one of the most loyal owner groups of any company. Unfortunately, the firm’s success has come at a price. New customers are sometimes frustrated at long waiting lists for a new bike, and other potential new customers say they are turned off at the enthusiasm of some of the current owners.  The average age of a Harley rider has risen from 35 in 1987 to nearly 47 in 2006.  Harley has a Wild Bunch reputation that drives some customers away, and a “this is for a different generation” effect on some potential younger customers.  Other potential customers are simply intimidated at the idea of riding a 400+ pound Harley-Davidson. To deal with these concerns, and to try to encourage new owners, HD developed the Rider’s Edge program in which anyone who could pass the Motorcycle Safety Foundation’s written test and driving test would be eligible for instructions on how to ride a Harley. The instructions are provided by local dealers (at this point 35 of HD’s 600+ dealers participate in the program).


Where does this program fit in the Harley-Davidson value chain? From a value chain perspective, how does the Rider’s Edge program at Harley-Davidson support the firm’s strategy?

problem: Develop a value chain for the airline industry. Identify areas in which any given airline might find a cost advantage by modifying the value chain in some way. Similarly, identify areas of the value chain in which the airline might be able to develop additional value for the airline customer. For ex, consider ways the ticketing operation might be reconfigured for either cost or value-added advantage.

Managerial Accounting, Accounting

  • Category:- Managerial Accounting
  • Reference No.:- M916

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