PS5003ACC: Collins Industries Case Study ( 2024-25) Managerial and Strategic Recommendations
University | Faculty of Business Environment and Society (BES) |
Subject | Management Accounting |
Collins Industries Case Study
Overview
Collins Industries is a decentralized organization with five divisions. Among these, the Electrical Division manufactures various electrical items, including the A21 electrical fitting. The division, currently operating at capacity, sells the A21 fitting for $7.50 each, which has a variable manufacturing cost of $4.25.
Scenario Analysis
The Brake Division, operating at 50% capacity, has requested the Electrical Division to supply the A21 fitting at $5 each. The Brake Division plans to use the fitting in a brake unit for a commercial airline manufacturer. The unit cost for producing the brake unit includes:
Hire a Professional Essay & Assignment Writer for completing your Academic Assessments
- Purchased parts (from outside vendors): $22.50
- Electrical fitting A21: $5.00
- Other variable costs: $14.00
- Fixed overhead and administration: $8.00
- Total cost per brake unit: $49.50
Key Issues
- The Brake Division risks losing the contract if the brake unit price exceeds $50.
- If the Electrical Division maintains the $7.50 price, the Brake Division may suffer losses.
- Collins Industries evaluates performance using ROI and profit measures.
Recommendations
a) Decision for Supplying A21 Fittings
As the manager of the Electrical Division, I recommend against supplying the fittings at $5. This price would not cover the variable costs of $4.25 and would reduce the division’s ROI.
Buy Custom Answer of This Assessment & Raise Your Grades
b) Economic Advantage to the Company
Supplying the fittings at $5 could benefit the company as a whole by securing the Brake Division’s contract. Full computations can illustrate the overall impact.
c) Transfer Price Agreement
Managers can negotiate a transfer price between $4.25 (variable cost) and $7.50 (market price). The optimal range maximizes both divisional and organizational performance.
d) Organizational Behavior Issues
Conflicts between divisional goals and organizational objectives may arise. Clear communication and revised performance metrics are necessary to align interests.
Information Systems Upgrade
The board is considering an integrated system using a single database. This system would enhance real-time data input and support management decisions with financial and non-financial metrics.
External Non-Financial Information
- Customer Satisfaction Surveys: To gauge client perspectives.
- Supplier Performance Metrics: To evaluate timeliness and quality.
- Market Trends Analysis: To anticipate industry shifts.
Collecting this data supports strategic planning and competitive advantage.
Stuck with a lot of homework assignments and feeling stressed ? Take professional academic assistance & Get 100% Plagiarism free papers
- The Impact of AI and Machine Learning on Data Privacy in the Era of Big Data Essay : Com302 Web Analytics Murdoch Singapore
- Biomedical Device Innovation Need Statement Assignment
- BPM213 TMA01 January 2025 Presentation
- FCS A2 -Fundamentals of Computer Systems Individual Assignment PdF (KHEA) Singapore
- A2359C AY2024 Term 4 – Project Assignment
- BUS356 TMA Jan 2025 Semester-Negotiation Strategies and Approaches: A Case Study, Singapore
- BUS363 TMA01:Enhancing Operations and Service Quality in Ride-Hail Services| January 2025 Semester, Singapore
- HFS105 TMA01: Secularization Trends and Religious Resilience in Contemporary Society| January 2025, Singapore
- HFS105 TMA01:Critique of Sociotechnical Systems Contexts in Accident Analysis, Jan 2025 Singapore
- MTH316 TMA01:Analysis of Continuity, Derivatives, and Gradient Functions – Singapore Assignment Jan 2025
UP TO 15 % DISCOUNT