E8.21 LO8.1 8.2 Distortion of product costs: manufacturer Spinning Wheels Pty Ltd (SW) manufactures car and truck wheels. The company produces four basic, high- volume wheels used by manufacturers of large cars and trucks. SW also has two speciality wheel lines, which are designed for use on expensive sports cars. SW costs all its products using a conventional volume-based costing system. Lately, SW's profits have been declining. Foreign competitors have been undercutting SW's prices in three of its four major product lines, and its sales and market share have fallen significantly. In contrast, sws speciality wheels have been selling steadily, although in relatively small numbers, in spite of three recent price increases. At a recent staff meeting, sw's managing director spoke about the issues faced by the company Our profits are going down the tube. It costs us $30 to manufacture our X25 wheel. That's our best seller, with o volume last year of 20000 units. But our chief competitor, based overseas, is selling essentially the same wheel for $28. They can't be making a profit. This is just another example of a foreign company dumping product on our shores. It's outrageous! I'm going to write to my local MP. The government needs to do something about this! On a bright note, thank goodness for our speciality wheels. Our salespeople have to push these wheels more and more. Take the 250 model for example It's a complicated thing to make and we don't sell many. but look at the profit margin. Those wheels cost us $50 to make, and we're selling them for $110 each! Required: 1. Do you think the managing director's remarks are valid? What do you think is contributing to the problems faced by SW? 2. Do you think the managing director's suggestion to push the sale of speciality wheels is a good one? Justify your response 3. What would you recommend that SW do to help address is situation? Justify your recommendations. Langle-Set,K,S, 0, 6 aden, P. (2007). Management courting Information og and ging ProQueShock Carina andiendo parteciproque.cobank hestekregen.com bokep pembakararapat.com Cameo 2000-09-26 07:52 386 PART TWO COSTS AND COSTING SYSTEMS E8.22 LO8.3 8.4 8.5 8.6 Key features of activity-based costing: manufacturer Refer to the Spinning Wheels case in Exercise E8.21. Suppose the firm's managing director has decided to implement an activity-based costing system. Required: 1. List and briefly describe the key features that SW's new product costing system should include. 2. What impact will the new system be likely to have on the company's situation? 3. What strategic options are likely to be considered once the results of the new costing system are examined? E8.21 LO8.1 8.2 Distortion of product costs: manufacturer Spinning Wheels Pty Ltd (SW) manufactures car and truck wheels. The company produces four basic, high- volume wheels used by manufacturers of large cars and trucks. SW also has two speciality wheel lines, which are designed for use on expensive sports cars. SW costs all its products using a conventional volume-based costing system. Lately, SW's profits have been declining. Foreign competitors have been undercutting SW's prices in three of its four major product lines, and its sales and market share have fallen significantly. In contrast, sws speciality wheels have been selling steadily, although in relatively small numbers, in spite of three recent price increases. At a recent staff meeting, sw's managing director spoke about the issues faced by the company Our profits are going down the tube. It costs us $30 to manufacture our X25 wheel. That's our best seller, with o volume last year of 20000 units. But our chief competitor, based overseas, is selling essentially the same wheel for $28. They can't be making a profit. This is just another example of a foreign company dumping product on our shores. It's outrageous! I'm going to write to my local MP. The government needs to do something about this! On a bright note, thank goodness for our speciality wheels. Our salespeople have to push these wheels more and more. Take the 250 model for example It's a complicated thing to make and we don't sell many. but look at the profit margin. Those wheels cost us $50 to make, and we're selling them for $110 each! Required: 1. Do you think the managing director's remarks are valid? What do you think is contributing to the problems faced by SW? 2. Do you think the managing director's suggestion to push the sale of speciality wheels is a good one? Justify your response 3. What would you recommend that SW do to help address is situation? Justify your recommendations. Langle-Set,K,S, 0, 6 aden, P. (2007). Management courting Information og and ging ProQueShock Carina andiendo parteciproque.cobank hestekregen.com bokep pembakararapat.com Cameo 2000-09-26 07:52 386 PART TWO COSTS AND COSTING SYSTEMS E8.22 LO8.3 8.4 8.5 8.6 Key features of activity-based costing: manufacturer Refer to the Spinning Wheels case in Exercise E8.21. Suppose the firm's managing director has decided to implement an activity-based costing system. Required: 1. List and briefly describe the key features that SW's new product costing system should include. 2. What impact will the new system be likely to have on the company's situation? 3. What strategic options are likely to be considered once the results of the new costing system are examined