The unit costs are dlvided as follows: 70 percent production and 30 percent marketing and customer service, Direct labor cost is the only driver used for tracing. Typica the division uses only production costs to define unit costs. The preceding unit product cost information was provided at the request of the marketing manager and was the result of a special study. Bryce Youngers, the president of CTB, is reasonably satisfied with the performance of the Cable Service Division, March's performance is fairly typical of what has been happening over the past two years. The Phone Division, however, is another matter. Its overall profit performance has been declining. Two years ago, income before. income taxes had been abeut 25 percent of saies. March's dismal performance was also typical for what has been happening this year and is expected to continueunless some action by management is taken to reverse the trend. During March, the Phone Division reported the following results: CableTech Bell Corporation (TB) operates in the telecommunications industry. CTB has two divisions: the Phone Division and the Cable Service Division. The Phone Division manufacturos telephones in several plants located in the Midwest. The product lines run from relatively inexpensive touch-tone wall and desk phones to expensive, high-quality cellular phones. CTB also operates a cable TV service in Ohio. The Cable Service Division offers three products: a basic package with 25 channels; an enhanced package, which is the basic package plus 35 additional channels and two mowle channels; and a premlum package, which is the basic package plus 55 additional channels and six movie channels. The Cable Service Division reported the following activity for the month of March: The unit costs are divided as folliows: 70 percent production and 30 percent marketing and customer service. Direct labor cost is the only driver used for tracing. Typically, the division uses only production costs to define unit costs. The preceding unit product cost information was provided at the request of the marketing manager and was the result of a special study. Bryce Youngers, the president of CTB, is reasonably satisfled with the performance of the Cable Service Division, March's performance is fairly typical of what has been happening over the past two years. The Phone Division, however, is another matter. Its overall profit performance has been declining. Two years ago, income before income taxes had been about 25 percent of sales. Marct's dismal performance was also typical for what has been happening this year and is expocted to continueuniess some action by management is taken to reverse the trend. During March, the Phone Division reported the following results: The pmost coit wec the marragesp objectives of pus methed. b. Alecation welese in: c. Cured traciop releten: d. Diver tracing netes an! During March, the Phone Division purchased materials totaling $312,000. There are no significant inventories of supplies (beginning or ending). Supplies are accounte separately from materials. CTB's Phone Division had sales totaling $1,170,000 for March. Based on Marh's results, Bryce decided to meet with three of the Phone Division's managers: Kim Breashears, divisional manager; Jacob Carder, divisional controlier; and Larry Hartley, sales manager. A transcript of their recorded conversation is given next: Bryce: "March's profit performance is down once again, and I think we need to see if we can identify the problem and correct it-before it's too late. Kim, what's your assessment of the situation?" Kim: "Foreign competition is eating us alive-selling phones at a lower price and high quality. If we could lower our prices by 10 to 15 percent, I think that we'd regain most of our lost market share. But we also need to make sure that the quality of our products meets that of our competitors. We are spending a lot of money each mon on inspection, rework, and warranties, I'd like to see these costs cut by at least 50 percent. If we could do that by improving quality, then customers would be more satisfied with our products, and we would not only regain our market share but increase it." Larry: "They're right, If we could lower our prices by 10 to 15 percent, 1 think that we'd regain most of our lost market share. But we also need to make sure that the quality of our products meets that of our competitors. As you know, we are spending a lot of money each month on rework and warranties. That wornles me. Id like to see that warranty cost cut by 70 to 80 pprent. If we could do that, then customers would be more satisfied with our products, and t bet that we would not only regain our market share but increase it." Jacob: "Lowering prices without lowering per-unit costs will not help us increase our profitability, I think we need to improve our cost accounting system. t am not The unit costs are dlvided as follows: 70 percent production and 30 percent marketing and customer service, Direct labor cost is the only driver used for tracing. Typica the division uses only production costs to define unit costs. The preceding unit product cost information was provided at the request of the marketing manager and was the result of a special study. Bryce Youngers, the president of CTB, is reasonably satisfied with the performance of the Cable Service Division, March's performance is fairly typical of what has been happening over the past two years. The Phone Division, however, is another matter. Its overall profit performance has been declining. Two years ago, income before. income taxes had been abeut 25 percent of saies. March's dismal performance was also typical for what has been happening this year and is expected to continueunless some action by management is taken to reverse the trend. During March, the Phone Division reported the following results: CableTech Bell Corporation (TB) operates in the telecommunications industry. CTB has two divisions: the Phone Division and the Cable Service Division. The Phone Division manufacturos telephones in several plants located in the Midwest. The product lines run from relatively inexpensive touch-tone wall and desk phones to expensive, high-quality cellular phones. CTB also operates a cable TV service in Ohio. The Cable Service Division offers three products: a basic package with 25 channels; an enhanced package, which is the basic package plus 35 additional channels and two mowle channels; and a premlum package, which is the basic package plus 55 additional channels and six movie channels. The Cable Service Division reported the following activity for the month of March: The unit costs are divided as folliows: 70 percent production and 30 percent marketing and customer service. Direct labor cost is the only driver used for tracing. Typically, the division uses only production costs to define unit costs. The preceding unit product cost information was provided at the request of the marketing manager and was the result of a special study. Bryce Youngers, the president of CTB, is reasonably satisfled with the performance of the Cable Service Division, March's performance is fairly typical of what has been happening over the past two years. The Phone Division, however, is another matter. Its overall profit performance has been declining. Two years ago, income before income taxes had been about 25 percent of sales. Marct's dismal performance was also typical for what has been happening this year and is expocted to continueuniess some action by management is taken to reverse the trend. During March, the Phone Division reported the following results: The pmost coit wec the marragesp objectives of pus methed. b. Alecation welese in: c. Cured traciop releten: d. Diver tracing netes an! During March, the Phone Division purchased materials totaling $312,000. There are no significant inventories of supplies (beginning or ending). Supplies are accounte separately from materials. CTB's Phone Division had sales totaling $1,170,000 for March. Based on Marh's results, Bryce decided to meet with three of the Phone Division's managers: Kim Breashears, divisional manager; Jacob Carder, divisional controlier; and Larry Hartley, sales manager. A transcript of their recorded conversation is given next: Bryce: "March's profit performance is down once again, and I think we need to see if we can identify the problem and correct it-before it's too late. Kim, what's your assessment of the situation?" Kim: "Foreign competition is eating us alive-selling phones at a lower price and high quality. If we could lower our prices by 10 to 15 percent, I think that we'd regain most of our lost market share. But we also need to make sure that the quality of our products meets that of our competitors. We are spending a lot of money each mon on inspection, rework, and warranties, I'd like to see these costs cut by at least 50 percent. If we could do that by improving quality, then customers would be more satisfied with our products, and we would not only regain our market share but increase it." Larry: "They're right, If we could lower our prices by 10 to 15 percent, 1 think that we'd regain most of our lost market share. But we also need to make sure that the quality of our products meets that of our competitors. As you know, we are spending a lot of money each month on rework and warranties. That wornles me. Id like to see that warranty cost cut by 70 to 80 pprent. If we could do that, then customers would be more satisfied with our products, and t bet that we would not only regain our market share but increase it." Jacob: "Lowering prices without lowering per-unit costs will not help us increase our profitability, I think we need to improve our cost accounting system. t am not