IMA大赛案例分析.ppt

L o g oA Case Study on Fine Foods,Inc.By Flame_NAI.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 ChainManagementITIntroduction.OutlineCase overviewProduct CostingSpecial OrdersPerformance EvaluationConclusion&Recommendations.Case OverviewPerformance evaluationproblemNon-financial indexFinancial indexProduct costing allocationPerformance evaluation method.Unreasonable cost allocation will lead toTheinfluenceoftheunreasonablecostallocationA Enterprise pricing is not reason-ableB Product profitability is difficult to estimateC The error of production decision-making D Performan-ce evaluation.twomainproblemsinthecostallocationallcostsallocatetoitsproductscannotgetaaccuratemeasureofeachproductsprofitabilitythewayofcostallocation(distributebyweight)istoosimple.direct calculated costs：Raw material,packaging material,and direct production salariesSo,thecostcantcoveralltheincalculablecostAnalysis point 1Variable manufacturing costs:Electricity,steam,water,and warehouse Costs，other incalculable 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 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.Mediaandsalespromotioncostsaresell-ingexpenses,whichbelongstoperiodcost.Soincludingthemintheproductcostisunreasonable.Analysispoint3:MediaandsalespromotioncostsforSMU1andSMU2areallocatedtoproductgroupsandtoindividualproductsba-sedonweightofproductsold.Analysispoint4:Similarly,salesandmarketingcostsalsoshouldbetheperiodcost,whichisallocatedtoproductsbasedonsalesvolumepreviously.Analysispoint5:Costsfortopmanagement,businessadministration,IT,HR,supplymanagement,andlogisticsareallocatedtothecostcentersandthenequallytoeachproduct.Thesecostsareallocatedtotheproduct,whichhastheverybighiddentrouble,Forinstance,themanagementcanhavealuxuriouslifeandpassedthemontothecostofproducts.Analysispoint1 thecosts(steamboilers,buildingmaintenance)areallocateddirectlytoproductsusingnetweightorgrossweightisabsurd.Analysispoint2Iftheallocationofremainingfactorycostsisafixedpercentage,thenallocationtoproductsisbasedonproductiontime.Ithardtosayjustbyproductiontime,thecostcanbeallocatedappropriately.Werecommendthevolumeofproductionmaybeabetterstandardofdistributionwhichismorerelevant.Thiskindofcostcalculationmethodallocatesindirectcoststopro-ductswithdifferentcomplexityaccordingtothesamestandards,whichisnotappropriate.Whileactivitybasedcostingmethodshowsitsad-vantage.ResourcesActivityActivityDriverlabor costoffice rents Related management cost packagingpurchase the number of laborers labor costfuel costs Vehicle depreciation cost packagingtransportthe number of laborers transport mileage goods weight labor costwater and electricity costs rent packagingstorage the number of laborers packaging valuelabor costwater and electricity costs packaging equipment depreciation subsidiary materials cost rent packaging operation the number of laborers asset value area of packaging materials Packaging operations center.ThroughtheaboveanalysisTherearemanyunreasonablefactorsinthecurrentproductcostingapproaches.Especially,itsunfairfortheproductdense,bulky,andheavy,suchasMP.So,Letshaveain-depthanalysisofspecialorder(virtuallyallproductMP).Special OrdersvSpecial Orders is one in which the contract specifies that it can be rejected within one year before delivery;otherwise it isnt special.Benefitsorderscontrolchannelofdistributionandseizethemarketopportunities.takefulladvantageofflexibleproductionCapacity.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 opportunity cost.processBy ProductsRaw material.Itspropertomakeadecisionbycontributionmargin,butSMU2didntconsiderallthefactorswhenusingthismethodFirstly,fixedmanufacturingcostshouldnotbeconsideredindecision-makingSecondly,defaultcostshouldbeamortizedwhenacceptingspecialorders;Thirdly,specialorderswerenothandledspecially.RecommendationsvJIT(Just In Time)vPromote consumer preference.TypesofresponsibilitycenterscostcenterRevenuecenterisresponsibleforsalesnotforthemanufacturingcostsofthesales.Costcenterisadepartmentthatgenerateslittleornorevenue.Adepartmentisresponsibleforminimizingcostswhilemaintaininganexpectedlevelofquality.revenuecenterinvestmentcenterprofitcenterTerms and definitions 1Terms and definitions 1Profitcenterisresponsibleforbothcostsandrevenuessoastogetagoodprofit.Investmentcenterisresponsibleforinvestments,costs,andrevenuesintheirdepartment.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 under the managers controlComputationmethodsofindicatorsevaluateperformance:Terms and definitions 2Terms and definitions 2.The importanceof 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 strategy 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 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 their profit and some expenses.Agency 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 SMUsAgency costs.Fine foods Performance evaluationCM1CM2CM3CM4OperatingProfitFour 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 manufacturing 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)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 evaluate 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 evaluationBSCBSC.Investment 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 products.FinancialCustomerInternal business processLearning 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 measuresExplanation.Conclusion&RecommendationsProducts cost is a symptomBalanced Score CardActivity-based costingPerformance evaluation is a problem.