Assignment: Managerial Accounting in Business

Scenario

You are the product line manager for a snow board manufacturing company based in Provo, Utah. As product line manager for the company's Xtreme line, you are ultimately responsible for all aspects of production as well as the profitability of the line. You have direct authority over the production, marketing and sales of the company's Xtreme line of snowboards. The first quarter sales figures are in and you see that sales are down and in several key markets you no longer hold the #1 position. You are concerned that when you attend the quarterly management meeting that this poor performance is going to be a topic of much discussion. Several months ago, you received information from an overseas manufacturer that can manufacture the bindings for the snow board at a fraction of your current cost to produce them in-house. This will lower the cost to produce the Xtreme line allowing the company to increase their margin, lower prices to customers or some combination of both. Consequently, you believe it is now time to revisit that correspondence and start putting together a plan to address the lackluster Q1 earnings report.

Questions

1.What qualitative and quantitative factors will you have to consider before recommending that the company outsource the production of the binding component of the Xtreme snow boards?

Qualitative factors to consider:

1.Labor - What are the labor laws in this foreign country? What skill level will the employees have? How many number of employees are available, and will that number be enough? What holiday's must they have off? Who would manage productions?

2.Returns - How long would it take for a customer to receive a package? How long would it take for a return to be processed? Are there shipping and handling fees? Would customer service be American based?

3.Technology - Is the most current technology available to produce each product and a large number of it? Would technology need to be shipped to the location? Would the employees know how to use the technology? If not, who would train them?

4.Product - If the materials are cheaper, will the product lose its former quality? Will we lose customers for having cheaper products? Will we lose customers for having outsourced products?

Quantitative factors to consider:

1.Cost-effectiveness - Will the cost of relocating overseas outweigh the current domestic cost? Will the cheaper products bring a higher profit margin?

2.What accounting information will you need in order to make the best decision for the company? When identifying the accounting information needed, indicate the following:

1.Is the information you need financial or managerial in nature?

Ultimately, the information needed would be managerial in nature. The reason being is because in this scenario, management or "insiders" need to make a decision for the benefit of the company using managerial accounting data. Also, management's decision will be based off of past, present, and future looking and that is associated with managerial accounting data. Furthermore, there are no rules saying that this is necessary for the future of the company, it is just known that it should be done.

2.How will you use the accounting information in evaluating the decision?

As management, I will use the managerial accounting information

3.Identify any potential risks associated with making this decision and how those risks can be addressed.

***I have begun to answer the questions but I am unsure***