SoalJenis-Jenis Activities dari Case
HadoutNo.ActivitiesNo.Activities1Purchasing Materials13Mixing
Ink2Preparing Materials14Invoicing sales3Cleaning out previous
color15Inserting inks into pen4Physical change over -> Set
Up16Maintain a minimum supply of raw material5Scheduling production
order17Improving the production process6Packaging
Product18Supplying machine capacity7Preparing Shipping
document19Payment of material8Preparing inspection20Collection of
A/R9Releasing Materials21Identifying BOM for each product10Empty
the valve22Monitoring finished goods inventory11Maintaining records
on the 4 products23Machine Maintenance12Shipping
products24Performing engineering change for productsSoal:1.Tentukan
Cost Driver yang dari activities diatas, cost driver yang sama
boleh digabung2.Indentifikasi cost driver biaya pemasaran design of
cost management system case Winchell Hal 377.2.a.Tentukan cost
object apa saja yang dipilih untuk menjadi tempat pembebanan
biaya2.b.evaluasi cost drivernya yang dipilih untuk membebankan
biaya tersebut, apakah sudah benar atau belum, kalau belum tolong
berikan saranCase Winchell Lighting Inc.IntroductionIn January
1986, Ken Johnson, VP and GM of Winchell Lighting, Inc. (WLI)
assigned Pamela Wright, Marketing Analyst, and Elizabeth Conrad,
Division Controller, to undertake the 1985 WLI StrategicMarketing
Analysis. The Strategic Marketing Analysis effort arose from a
collaboration, strating in 1982, between WLI management and the
members of the planning group of WLI's parent, Hawkes.The goal was
to trace marketing cost to individual product lines and channel so
that the overall profitability of each line and channel could be
determined.Company BackgroundWinchell Lighting Inc. memproduksi dan
menjual produk-produk lighting. Consumer Linesnya sendiri dijual
melalui mass-merchandisers dan supplier grosiran. Produk Komersil
dijual melalui kontrak distribusi dan industrial suppliers.1985
Income Statement ($000)Sales$127,960.00100%Cost of
SalesMaterial$45,529.00Labor$7,082.00Overhead$32,393.00$85,004.0067%Gross
Profit$42,956.0033%Sales and General Administrative
ExpensesMarketing
Expenses$20,953.00General/administrative$10,861.00$31,814.0025%Operating
Income$11,142.008%Product Lines1. Consumer Incandescent Fixtures
contained a broad range of fixtures designed specifically for easy
installation In the residential market. They were all Surface
mounted, requiring no carpentry work.The products inclouded
pendants, close-to-ceiling fixture, and chandeliers. Residential
units were manufactured to less demanding standards than commercial
fixtures and were considerably cheaper.2. Consumer Flourescent
Fixtures contained a small range of surface-mounted fixture
designed specifically for the residential market.3. Commerical
Recessed Fixtures contained fixtures for incandescent bulbs
designed to be recessed into the ceiling.4. Commerical Fourescent
Fixtures contained fixtures for fluorescent lighting designed to be
recessed into the ceiling.5. Commerical Track contained both track
and the fixtures designed to be attached to the tracks. Tracks were
lenghts of plastic tubing into which the fixtures could be snapped.
Track lighting usedconventional incandescent, tungstenhalogen, and,
recently, compact fluorescent lighting.6. Commerical Ceiling
Fixtures contained high-quality ceiling-mounted fixtures that had a
high artistic content.7. Commercial Wall Fixtures contained a
diverse set of fixtures that were wall mounted. Many of these
fixtures used the new compact, energy-efficient fluorescent light
sources.8. Commercial External Fixtures contained fixtures
specifically designed for external use. These fixtures were of
heavy construction to withstand weather conditions that required
waterproofelectrical connections.Competitive EnvironmentSales to
the consumer markets generated about 15% of Winchell's total dollar
volume. WLI was the only company in the two almost independent
consumer segments. Fluorescent segment wasdominated by 3 U.S. based
competitors - Gold, Conway, and Englehart - who together controlled
about 70% of the market. The incandescent segment was more
competitive, with 3 U.S. Companiescontrolling about 70% and imports
the other 30% of the market. Most of the U.S. companies used
offshore sourcing to match the low cost of imported products.Market
Share Analysis-Consumer ProductsFlourescentSHARE BY CHANNEL OF
DISTRIBUTIONCompetitorsMass MerchandisersCommercial
SuppliersContractIndustrial
SuppliersGoverrnmentOEMWLI152510102515Gold302530252025Conway202010202030Englehart251040203030Gellis1020102550%
of WLI total product255051055line salesIncandescentSHARE BY CHANNEL
OF DISTRIBUTIONCompetitorsMass MerchandisersWholesale
SuppliersIndustrial
SuppliersWLI202020Commonwealth252525Celebrity252525Imports303030%
of WLI total product305020line salesThe commercial Market,
accounting for the other 85% of Winchell's revenues, had three
other full-line producers - Haddon, Conway, and Hobart - plus 2
companies, Somerset and King, thathad gained a respectable % of the
track and external fixture markets, respectively.MARKET SHARE
ANALYSIS - COMMERICAL PRODUCTSRecessedSHARE BY CHANNEL OF
DISTRIBUTIONCompetitorsMass MerchandisersWholesale
SuppliersIndustrial
SuppliersWLI151515Haddon202525Hobart201010Conway203030Others252020%
of total product702010line salesFlourescentSHARE BY CHANNEL OF
DISTRIBUTIONCompetitorsContractIndustrial
SupplierGovernmentOEMWLI10152010Haddon45453575Hobart20555Conway2025250Others5101510%
of total product40251520line salesTrackSHARE BY CHANNEL OF
DISTRIBUTIONCompetitorsContractIndustrial
SupplierGovernmentOEMWLI202020Haddon202020Hobart202020Conway202020Somerset202020%
of total product202515line salesCelingSHARE BY CHANNEL OF
DISTRIBUTIONCompetitorsContractIndustrial
SupplierGovernmentOEMWLI30302030Somerset50505050Haddon15152510Others5555%
of total product30202030line salesWallSHARE BY CHANNEL OF
DISTRIBUTIONCompetitorsContractIndustrial
SupplierOEMWLI102010Conway501025Haddon254050Hobart15205King01010%
of total product202060line salesExternalSHARE BY CHANNEL OF
DISTRIBUTIONCompetitorsContractIndustrial
SupplierGovernmentOEMWLI50506050Conway3030530Haddon10102510Others10101010%
of total product20204515line salesMarketing ChannelsThe marketing
department was organized along functional lines with separate
departments for the three major business segments: Commerical
Incandescent, Commerical Fluorescent, and ConsumerProducts. The
Commercial Incandescent department supported a full line of
fluorescent lighting fixtures and sold them to the commerical
market through a separate sales force. The Consumerdepartment had
its own sales force, which sold consumer products to mass
merchandisers and wholesales suppliers.WLI sold its products
through 6 distinct distribution channels. 2 of these channels, mass
merchandisers and wholesale suppliers, served the consumer market,
and the 4 served the commercial market.The six channel were as
follows:1. Mass merchandiser - Mass merchandisers were the
large-volume consumer outlets, such as K-Mart, Caldor, and Zayre,
that sold directly to the public. They typically carried a small
range of lightingfixtures. The mass merchandisers often promoted
these products heavily, and WLI provided support for this activity.
WLI favored these companies with a liberal returns policy and deep
cash discount.in 1985, mass merchandiser sales amounted to
apporximately $ 11 million.2. Wholesale suppliers - Retail hardware
chain such as The Value and Ace) had formed cooperative
associaltions to obtain bulk discounts based on their combined
purchasing power. The associationused central warehouse to store
their bulk-purchased merchandise that would be shipped, in small
lots, to member on request. In 1985, WLI's sales to wholesale
suppliers were $ 3 million.3. Contract distributors - WLI provided
complete lighting system for commercial buildings. To Compete in
this market, WLI employed highly skilled marketing personnel who
worked closely with architects. High-quality productsand timely
delivery were critical for this market segment. When an architect
asked for a bid, the salesperson examined the architect's building
plans and generated a complete list of lightingfixtures for the
project. This activity required considerable knowledge of WLI's
product lines and of local fire, building, and electrical codes.
The end document provided a detailed specificationfor every fixture
in the building. Contract sales were nearly $ 80 millions in 1985.
The recessed and fluorescent product lines' sales were not
independent in the contract channel. Architects selectedthe type of
fixtures that were to be used, usually a mixture of recessed and
fluorescent lights. WLI had little real influence on the type of
fixture selected.4. Industrial Suppliers - A large protion of the
industrial supplier business was replacement of lighting fixtures.
Building owners and operators purchased their lighting fixture from
2 type of wholesalers.Master wholesalers such as Mass Gas and
Electric and Standard Electrical Supply, specialized in supplying
lighting fixtures to smaller distributors, such as Mass Hardware,
who carried a broad rangeof products for the building trade.
Independent store, such as Commonwealth Light in Boston, carried a
larfe variety of fixtures sold directly to the end users. The
independent stores demandedhigh-quality products and timely
delivery but did not required specialized or customized
products.Sales persons to industrial suppliers had to be well
informed about the company's products. They regularly called on
suppliers to take inventory, assist in the preparation of orders to
keep the suppliersadequately stocked, and alert the suppliers about
building code changes that would affect WLI products. Intermediary
agents and distributors, if applicable, were also involved in this
process. In 1985,sales to suppliers totaled $25 million.5.
Government - The US Government occasionally requested a bid for
very large volumes of fixtures. Over the years, WLI had not placed
much effort into getting listed on the governement's
acceptablevendor lists, Sales in 1985, amounted to just over $
400.000.6. Original equipment Manufacturers (OEMs) - Certain
equipment manufacturers, required special light flixtures for their
products. For example, Sampson Furniture needed recessed fixtures
for glasscabinets, and Lamb Cabiners required fluorescent fixtures
for its aluminium and glass display cabinets. Since this kind of
company was difficult to identity, WLI responded to bid requests
but did notacceptively seek out the business. Once a contract was
awarded, the OEMs typically sent in large orders a t regular
intervals. Sales in 1985 amounted to just over $ 9 million.The
Strategic Marketing AnalysisIn 1982, WLI had adopted a
product-channel perspective following a cost study performed with
the assistance of the Hawkes Strategic Planning Group. Douglas
Farish, Vice-President of Strategic Planningat Hawkes, commented on
the process of developing the new product-channel perspective at
WLI.In 1981, the Hawkes planning department initated the
development of a strategic data base by business segment. Each
Hawkes business was partitioned into much finer system. Only by
disaggregatingcould we focus on economic units that were reasonably
coherent - that is, units within which we had roughly the same
share, perceived quality, and profitability.The existing accounting
system, which broke the business into about 150 product groupings,
falied to reflect the different costs of doing business in each
distribution channel. With marketing expensesexceeding 15% of sales
revenue, management wanted to know how each product line was
performing in total and by channel. Thus, the product-channel
perspective was developed.As we began the initial marketing cost
analysis, we quickly learned that tracing period expenses was more
difficult than allocating factory overhead. While in the factory,
proxies for cost drivers can oftenbe found where actual data do not
exist, the same cannot be said of many selling, general, and
administrative activities. To understand the economics of how work
was generated in the SG&A depart-ments, we relied heavily on
the qualitative information stored in the heads of managers who
were most familiar with the activity of each departement. The art
of this sort of analysis is to be able toquantify the qualitative,
that is, to convert the qualitative insights of managers into a
quantitative model.We organized a series of meetings to bring
together a number of managers from a given function so that
different perspective on the same issue could be represented. My
primary function as moderatorof these sessions was to pose the
right questions so that we could discover the principal drivers of
cost. I also systhesized the estimates given me and fed them back
to the managers so that they couldjudge their reasonableness.In
addition to debriefing knowledgeable managers, we sampled the
experience of the sales force to gather qualitative data for the
model-building effort. Ultimately, I wanted WLI management
toacquire the skill we had developed through experience in reducing
soft data to a reasonably reliable model. This was important
because the system needs to be revised periodically to reflect
changesin the relative importance of the cost drivers and of our
expenditure of effort among channels. The system therefore must not
be rigid, but rather capable of evolving with the business.By 1986,
the company had developed specific procedures to facilitate the
marketing cost study. The analysts strated from a channel
profitability report in which SG&A expenses were treated as a
commonor below-the-line cost and not alloocated to individual
product lines. The difference in gross margins across the 6
channels reflected the margins earned over manufacturing costs on
the products soldthrough each channel. In the past, if management
wanted to know operating profit after fully allocating all costs,
the cost analysts had allocated SG&A costs based on sales
revenue. Since SG&Aexpenses were about 25% of sales revenue,
the operating profit for each channel equalled the gross margin %
less 25%.Channel Profitability Report(Existing System $000)Mass
MerchandisingConsumer Wholesale SuppliersContractIndustrial
SuppliersCommercial GovernmentOEMTotalNett
Sales$10,694.00$3,120.00$79,434.00$25,110.00$402.00$9,200.00$127,960.00Material$8,503.00$2,083.00$25,089.00$6,886.00$99.00$2,869.00$45,529.00Labor$29.00$63.00$4,798.00$1,437.00$33.00$724.00$7,084.00Overhead$150.00$268.00$22,172.00$6,503.00$154.00$3,146.00$32,393.00Total$8,681.00$2,413.00$55,029.00$14,826.00$286.00$6,739.00$87,974.00Gross
Profit$2,013.00$707.00$27,375.00$10,284.00$116.00$2,461.00$42,956.00Gross
Margin19%23%34%41%29%27%34%SG&A$31,814.00Operating
profit$11,142.00Profit Margin9%Net invested
capital$54,141.00RoI21%Description of Marketing ExpensesThe
strategic marketing analysis attempted to trace more accurately the
selling and marketing expenses to indivudal channel and product
lines. The analysis strated from detailed descriptions of
eachmarketing expense category reported in the income
statement.Marketing Expenses by Category (000)Categoty1985
Expenses%Commission$7,376.0035%Advertising$230.001%Catalog$714.003%Co-op
Advertising$1,006.005%Sales
Promotion$1,132.005%Warranty$94.001%Sales
Administration$8,957.0043%Cash
Discount$1,444.007%Total$20,953.00100%CommisionsWLI products were
sold on a commission basis by independent manufacturer's
representatives. These representatives often carried a
complementary line of products manufactured by other firms, butthey
were not allowed to carry directly competitive
products.Representative did not maintain an inventory. They sold to
customers, and then WLI shipped the product directly to the
customers. The manufacturing representative received a 5%
commission foroncandescent products and up to 12 1/2 for
fluorescent products. The higher rate for fluorescent sales
reflected in historical attempt to increase sales in certain
fixture lines.WLI commercial products were also slod by company
personnel who received a flat 5% commision but no base salary. WLI
paid benefits such as health, pension, and FICA. Sales personnel
absorbed alltravel expenses, including any automobile costs. In
some instances, a +- 1/2% commission adjustment was made to
compensate for the size of the salesperson's territory.CatalogThe
company publised 3 catalogs; fluorescent commercial, incandescent
commercial, and consumer. The commercial catalogs were published as
3-ring binders to facilitate easy updating and insertionof new
product descriptions. Because the product descriptions did not
contain price data, the binder arrangement also allowed for price
list supplements as required. WLI products were endorsed bySweet's
Catalog, the architect's reference manual for all building
materials. WLI paid Sweet's to prepare and include separate
subsections in the Sweet's Catalog.WLI's contract sales business
used the latest lighting technology and, therefore, required
up-to-date commercial catalog information. Industrial suppliers
also used placement business and only stockedbestsellers, they
could use out-of-date catalogs with little risk. In both instances,
products were ordered just as specified in the catalogs: Unique
design could not be obtained. All WLI representative keptcopies of
the catalogs and passed order requests through to WLI headquarters.
Because of the large number of requested for the catalogs, no
records were kept at headquaters or by representatives onwhere the
catalogs were sent.The WLI consumer catalog contained 8 to 10 pages
listing all product sold in the mass merchandiser and wholesale
supplier channels.AdvertisingAdvertising expenditures were
primarily the cost of advertising in trade and industry
publiocations, attendance at trade shows, and the costs of displays
and exhibits. The firm placed advertisements inpublication such as
Lighting Institute Magazine, Light Fixture Digest (used by the
supplier channel) Discount News, Do It Yourself, and the Hardware
Retailer. Peripheral journals, such as ArchitecturalRecord, were
not generally used.2 of the most noteworthy trade shows attended
were the Lighting Fixture Institute Show and the National Hardware
Show. The advertising expenses for these shows included
registration fees and thecosts of creating and installing the
booth, exhibits, and displays.Cooperative AdvertisingCooperative
Advertising was directed to the consumer market. Mass merchandisers
placed calor pull-outs in Sunday newspapers. Local hardware stores
placed smaller advertisements in local papers.Radio advertisements
were used to annouce promotions and special prices.The advertising
Checkin Bureau monitored advertising copy for WLI. It received a
supply of sticks, a copy of the advertising bill, and a proof of
the advertising. WLI then paid the advertisers for theircosts up to
a cap set a 5% of last year's sales.Sales PromotionSales Promotion
were used to increase sales in both the commercial and consumer
markets. Some commercial promotions offered incentives to
distributor to purchase WLI products by awardingpoints based on the
number of specified product items ordered. These points were
exchangeable for gift certificates or merchandise at a major
department store. Others offered baker's dozen sales.in which the
distributor received, say, 12 products for the price of 10. The
costs of such promotion schemes included developing, printing, and
distributing brochures, mailings, and order forms.Consumer
promotions were product specific. They typically consisted of
baker's dozen or special discount offers to mass merchandisers and
wholesale suppliers.WarrantyWarranty expenses were incurred on
major contracts to overcome problems that could only be resolved in
the filed. Sales returns were not included in warranty expenses but
were treated as a directdeduction from sales.Sales
AdministrationSales Administration expenses included costs that
were too small to be treated as separate line items. (Sheet Sales
Administration)Cash DiscountIf WLI shipped before the 25th of the
month and payment was received before the 10th of the following
month, the customer could take a 2% discount. If WLI shipped after
the 25th of the month,the discount could be taken if payment was
received before the 10th of the second month. About 60% of goods
were shipped during the first 25 days of each month.Tracing
Marketing ExpensesWright and Conrad described the procedures they
used for assiging marketing costs to the product lines and
distribution channels.PW :The distribution of Marketing Expenses
starts with the document describing each component of expense. It
formed the basis for our analysis. After we were sure we understood
how each expensebehaved, we began to develop allocation routines.
Obviously, we relied heavily on the procedures used in prior
years.Catalog expense was slightly more difficult. We publish 3
catalogs, one for each of the 3 business segments, It is easier to
talk about the commerical and consumer segments separately.The WLI
commercial catalogs are really a collection of mini poduct line
catalogs that we combine together in a 3-ring binder. This approach
is economical because it allows us to change 1 product linecatalog
without replacing the others. Unfortunately, we do not keep
development costs for each product line catalog separately, so we
could not break it down any further than the catalog level.This
forced us to estimate the relative share of catalog costs by
product line and channel.In contrast, the Sweet Catalog is used
only in the contract business. We simply took all of the associated
costs for this catalog and assigned them to the contract
channel.For catalog that covered several channels, we split catalog
costs using the number of different outlets in each channel as the
allocation base. We assigned catalog costs to the product lines on
the basisof sales dollar in each channel.We assigned the cost of
consumer catalogs in the same way. The mass merchandiser only stock
a limited range of products and do not need a large catalog. But
the wholesalers, who stock our entire line,need full-line catalogs,
Again we used our knowledge of the number of outlets and the
intensity of use in each channel to estimate their relative share
of catalog costs.Commission and catalog expenses were relatively
easy. Advertising, on the other hand, was more difficult because of
the range different activities we undertake. We broke advertising
into 2 sections, trade and coorperative.These 2 types of
advertising are quite different from each other.Cooperative
advertising was completely different. First, it predominatly occurs
in the 2 consumer channels, mass merchandising and wholesale
suppliers. Second, the Advertising Checking Bureau invoicescould be
traced to each channel, which gave us an accurate measure of the
advertising expenses in each channel.Tracing channel Costs to
product lins, and there was no easy way to determine how much
benefit was attributable to each line. It was simply not practical
to count square inches, in any case, in many ads, thelargest image
was the company name. The local radio spots suffered from the same
problem. We were not going to count seconds, and anyway the company
name was often the most prominent partof the ad.Sales promotions
occur at the product and product line level, so we ended up
adopting exactly the opposite approach than we had taken for
advertising. Instead of tracing costs to the segments or
channels,and then to product lines, we traced promotion costs first
to product or product lines and then summed up the costs for each
product line in a channel. This was relatively straightforward
because werecord promotion expenses by product code.Sales
administration is a collection of 9 relatively small expense
catagories. We had to deal with each one separately. We were
surprised by how much resources were required by some channels and
notby others. The allocations all made sense after we looked at
them. It was magnitude of the effect that was unexpected.Allocation
of Sales Administration Expenses to ChannelConsumer (%)Commercial
(%)Mass MerchandisingWholesale SuppliersContractIndustrial
SuppliersGovernmentOEMCustomer service116384311Marketing
MGMT210601000Sales Policy342830803Marketing traveland
entertainment84443505Postage835352300Administrative traveland
entertainment2115422100Warehousing521601400Meeting1212423500Fixed
Expenses1318502000The channel Profitability Report is the most
important. It demonstrates how significant the marketing cost
analysis really is. The resulting channel profitabilities, return
on investment, and residualincomes are very different from what we
used to think they wereEC:Commissions were the simplest to handle.
We traced commission payments to the various product lines and then
allocated them to channel on the basis of the sales volume of
product lines in eachchannel.We used our knowledge of the business
to guide us. For example, we knew that the incandescent commercial
catalog is used in the contract and industrial supply channel.
However, the contractbusiness is always into new products, and it
requires the most up-to-date catalogs, we are continuously sending
them catalogs. The industrial supply channel is exactly the
opposite. In the replacementbusiness, the suppliers usually only
stock a limited range of the bestsellers. These tend not to change
from year to year, and consequently industrial suppliers are not
bothered if their catalogs are notup to date.Our catalogs do not
contain price information because prices change more frequently
than the contents of the catalogs. We issue a new price list
whenever we want to change prices. The expense of printingand
distributing these lists was assigned using the same ratios as we
had identified for the catalogs themselves.Trade advertising in the
industry magazines could be easily traced to the 3 business
segments. First, we have project control over all
advertising-related costs. Second, we advertise incandescent
andfluorescent products separately. Third, the consumer market is
reached by different magazines. The real problem was how to
allocate the costs among the channels served by each magazine. We
feltthat some magazines really only served one channel. For
example, The Lighting Ledger served industrial suppliers and
Discount Store News reached mass merchandisers. Other magazines,
for exampleElectrical Suppliers, covered several channels, in which
case we estimated the relative benefit by channel and allocated the
costs accordingly.In the end, we opted to use sales within the
channel to allocate advertising costs to the product lines.We used
the same approach with warranty expenses. These occur when we have
to go into the field and correct a problem that has developed in a
large commercial contract. If the expenditure is above$ 10.000 then
we open a special project. These expenses are easily traced to the
channel in which they occurred. However, if the expenditure is
below $ 10.000 then the cost are captured only by productline.
These can be allocated to the channels on the basis of the sales of
each product line in that channel.Cash discounted were allocated to
channel by selecting large representative accounts within each of
the channels and determining their accounts-receivable-to-sales
ratio. From these ratios, we computedthe day's-sales-outstanding
(DSO). We used the DSOs to estimate the cast discounted in each
channel.After performing all the analysis, we produced 2 sets of
reports. The first reported the marketing costs as a % of sales for
each major product line. The second added up all the marketing
costs in each ofour 6 distribution channels to obtain a new Channel
Profitability Report. For the channel report, we also traced the
utilization of net invested capital, including working capital
items such as inventoryand accounts receivable, to individual
channels so that we could measure the return on capital for each
channel.Production and Marketing Costs as a % of SalesCommerical
Track LightingDistribution ChannelCommercialContract (%)Industrial
Suppliers (%)Government (%)OEM
(%)Sales100%100%100%100%Material29.5%28.6%34.4%35.3%Labor15.3%6.5%8.6%8.5%Overhead25.1%22.0%33.0%28.2%Total69.9%57.1%76.0%72.0%Gross
Margin30.1%42.9%24.0%28.0%Commission5.9%5.4%2.8%4.0%Advertising0.2%0.2%0%0%Catalog0.6%0.6%0%0%Co-op
advertising0.5%0.5%0%0%Sales
Promotion0.5%0.5%0%0%Warranty0.1%0.1%0%0%Sales
administration7.2%6.8%4.7%3.8%Cash
Discount1.1%1.0%2.8%1.2%Total16.1%14.7%10.3%9.1%General and
ADM8.5%8.5%8.5%8.5%Profit Margin5.5%19.7%5.2%10.4%1985 Channel
Profitabilty Report(Marketing Cost
Analysis)($000)ConsumerCommercialMass MerchandisingWholesale
SuppliersIndustrial SuppliersGovernmentOEMContractTotalNet
Sales$10,694$3,120$25,110$402$9,200$79,434$127,960Material$8,503$2,083$6,886$99$2,869$25,089$45,529Labor$29$62$1,437$33$724$4,798$7,083Overhead$150$268$6,503$154$3,146$22,172$32,393Total$8,681$2,413$14,826$286$6,739$52,059$85,004Gross
Profit$2,013$707$10,284$116$2,461$27,375$42,956Gross
Margin19%23%41%29%27%34%34%Marketing
ExpensesCommission$696$270$1,344$12$372$4,682$7,376Advertising$46$12$380.0$2$132$230Catalog$36$14$1600.00.0$504$714Co-op
Adv$380$90$1200.00.0$416$1,006Sales
Promotion$494$128$1140.0$2$394$1,132Warranty$2$2$220.0$4$64$94Sales
Adm$908$268$1,714$20$351$5,696$8,957Cash
Discount$118$56$252$12$114$892$1,444Total$2,680$840$3,764$44$845$12,780$20,953General
and Adm$907$265$2,131$36$781$6,740$10,860Operating
profit$(1,574)$(398)$4,389$36$835$7,855$11,143Profit
Margin-15%-13%17%9%9%10%9%Net Invested
Capital$5,447$1,643$10,974$184$2,748$33,154$54,150RoI29%-24%40%30%30%24%21%Residual
Income-2936-809164610149-433$(2,373)
Toshiba:Allocated on the basis of equipment utilized and working
capital levels
Sales AdministrationAllocation of Sales Administration
ExpensesCustomer service. Customer service involved order entry and
editing using an online system. The largest users were the
industrial suppliers, who placed many small orders, thereby
creating a lot of paperworkand contractors, who, while only placing
a small numbers of orders, required much telephoning back and forth
to establish the correct mixture of products. Other users, such as
the OEMs, mass merchandisers,and the government, required little
attention.Customer service expenses were allocated on the basis of
management estimates. Contractor and industrial suppliers received
the highest amounts because most of the customer service activity
wasconcentrated in those 2 channels.Marketing management. Marketing
management expenses were the salaries of all of the managers in the
marketing department.Marketing management expenses were allocated
proportionally to the time spent by the managers. For functional
managers this was relatively easy because they were assigned to
particular segments. It wasmore difficult for support function
managers because their activities were firm-wide (research manager
and pricing manager). Where possible, the costs of these activities
were traced to the channel.Otherwise, they were allocated on the
basis of sales dollars.Sales Policy. Sales Policy expenses arose
from settling disputed claims. Mass merchandisers had the largest
numbers of disputed orders, typically complaining about short
shipments and other shipmentmistakes. They used their large
outstanding receivable balances as leverage against the firm and
would withhold payment until all issues relating to the shipment
were settled. The firm used a commonsense approach on whether to
fight. Contractors similarly disputed pricing, shrinkage, and any
shrortages of the trivial accessories, such as screws, that
accompanied their orders. Other channels, such asthe industrial
suppliers, raised similar issues but to a lesser extent.Sales
policy expenses were first traced to the 3 business segments and
then allocated to the channels using managerial estmates. Within
the channels, they were allocated to the product lines
usingrelative sales dollars.Marketing travel and entertainment.
Marketing travel and entertainment expenses consisted of the travel
expenditures of the marketing managers. The contract business
required extensive travelbecause there were no regional managers,
large individual contracters, the competitiveness of the business,
and the technical complexity required a lot of handholding and
entertainment by management.The other channels required relatively
little travel, typically only for shows and other events.Marketing
travel and entertainment expenses were traced to the person that
filled the expense report and hence to the business segment.
Certain channels required more travelling than others- forexample,
the contractor channel, because there are no regional managers.
These costs were allocated using a mixture of managerial estimates
and sales lars.Postage. The majority of postage expenditures were
related to catalog mailings. They were allocated on the basis of
the catalog expenses in each channel.Administrative travel and
entertainment. Administrative travel and entertainment expenses are
the costs incurred when the director of marketing, the pricing
manager, or marketing analyst traveled to meetcontractors, mass
merchandisers, and industrial suppliers. The 3 individuals that
charge to this line item were asked to estimate the % of their
share of these costs by channel.Warehousing. Warehousing expenses
were the costs of keeping finished goods inventory in the warehouse
ready for shipment. These costs were allocated to the product lines
based on the inventorylevel of each product line and to the
channels by relative sales level.Meetings. Meeting expenses were
incurred for the firm's regular national sales meetings. The costs
of national sales meetings were tracked to the 3 business segments
and then allocated to the channelson the basis of managerial
estimates.Fixed Expenses. Fixed Expenses consisted of a number of
different items such as depreciation, heat, light, and power,
telephone, building maintenance, suppliers and equipment rental
charges.The expenses were allocated to each segment by department
using a number of different allocation routines and then to the
channels using managerial jdugement.
Jawaban Soal 1No.ActivitiesNo.Activities1Purchasing
Materials13Mixing Ink2Preparing Materials14Invoicing sales3Cleaning
out previous color15Inserting inks into pen4Physical change over
-> Set Up16Maintain a minimum supply of raw material5Scheduling
production order17Improving the production process6Packaging
Product18Supplying machine capacity7Preparing Shipping
document19Payment of material8Preparing inspection20Collection of
A/R9Releasing Materials21Identifying BOM for each product10Empty
the valve22Monitoring finished goods inventory11Maintaining records
on the 4 products23Machine Maintenance12Shipping
products24Performing engineering change for productsJenis-jenis
Cost DriverTransaction DriverDuration DriverNo.ActivityCost
DriverType of Driver1Purchasing MaterialsNumber of ink
bottleTransaction Driver2Scheduling production orderMinutes to
schedulingDuration Driver3Cleaning out previous color and empty the
valveMinutes to wash out the valveDuration Driver4Preparing
inspectionMinute to inspectDuration Driver5Releasing materials and
mixing inkNumber of ink bottleTransaction Driver6Inserting inks
into penNumber of pen producedTransaction Driver7Psysical change
over -> Set UpMinutes to set upDuration Driver8Preparing
materials and maintain aNumber of ink bottleTransaction
Driverminimum supply of raw material9Maintaining record on the 4
productsMinute to record the amount of each productDuration
Driver10Performing engineering change forNumber of spare
partTransaction Driverproducts and indentifying BOM forMinutes to
identifying BOMDuration Drivereach product11Monitoring finished
goods inventoryMinutes to monitoringDuration Driver12Machine
maintenanceMinutes of Machine's operational capacityDuration
Driveruntil overhaul (Machine Hours)13Supplying machine
capacityMachine HoursDuration Driver14Invoicing Sales and AR
CollectionNumber of Pen producedTransaction Driver15Preparing
Shipping DocumentNumber of Pen producedTransaction
Driver16Packaging Product and shipping productNumber of Pen
producedTransaction DriverSIMPLIFICATION OF
ACTIVITIESNo.ActivityGrouping of ActivitiesCost DriverType of
Driver1Purchasing MaterialsScheduling Production RunsNumber of
Production RunsTransaction Driver2Scheduling production
orderScheduling Production RunsNumber of Production RunsTransaction
Driver3Cleaning out previous color and empty the valvePhysical
changeoverSetup timeDuration Driver4Preparing inspectionScheduling
Production RunsNumber of Production RunsTransaction
Driver5Releasing materials and mixing inkScheduling Production
RunsNumber of Production RunsTransaction Driver6Inserting inks into
penPhysical changeoverSetup timeDuration Driver7Psysical change
over -> Set UpPhysical changeoverSetup timeDuration
Driver8Preparing materials and maintain aMaintaining RecordsNumber
of ProductsTransaction Driverminimum supply of raw
material9Maintaining record on the 4 productsMaintaining
RecordsNumber of ProductsTransaction Driver10Performing engineering
change forMaintaining RecordsNumber of ProductsTransaction
Driverproducts and indentifying BOM foreach product11Monitoring
finished goods inventoryMaintaining RecordsNumber of
ProductsTransaction Driver12Machine maintenanceSupplying machine
capacityMachine HoursDuration Driver13Supplying machine
capacitySupplying machine capacityMachine HoursDuration
Driver14Invoicing Sales and AR CollectionMaintaining RecordsNumber
of ProductsTransaction Driver15Preparing Shipping
DocumentMaintaining RecordsNumber of ProductsTransaction
Driver16Packaging Product and shipping productScheduling Production
RunsNumber of Production RunsTransaction Driver
Jawaban Soal 2 Cost ObjectTentukan cost object apa saja yang
dipilih untuk menjadi tempat pembebanan biayaType of CostCost
ObjectsType of CostCost ObjectsMarketing ExpenseMarketing
ChannelsSales Administration ExpenseMarketing ChannelsMass
MerchandisersMass MerchandisersWholesale suppliersWholesale
suppliersContract distributorsContract distributorsIndustrial
suppliersIndustrial suppliersGovernmentGovernmentOriginal Equipment
ManufacturersOriginal Equipment ManufacturersProduct LinesProduct
LinesConsumer Incandescent FixturesConsumer Incandescent
FixturesConsumer Flourescent FixturesConsumer Flourescent
FixturesCommercial Recessed FixturesCommercial Recessed
FixturesCommercial Fluorescent FixturesCommercial Fluorescent
FixturesCommercial TrackCommercial TrackCommercial Ceiling
FixturesCommercial Ceiling FixturesCommercial Wall
FixturesCommercial Wall FixturesCommercial External
FixturesCommercial External FixturesBusiness Segments
Jawaban Soal 22.bEvaluasi cost drivernya yang dipilih untuk
membebankan biaya tersebut, apakah sudah benar atau belum, kalau
belum tolong berikan saranCost ObjectCost PoolCost DriversEvaluasi
& SaranMarketing ChannelsCustomer:Marketing ExpensesMass
Merchandisers1. Commision ExpenseSales volume in the product
lineCommision expense terbagi menjadi 2, yaitu: commision expense
untuk consumer fixture dan commercial fixture. Cost driver untuk
commision expense consumer fixture yang dipilih adalah number of
sales volume in the product line sudah benar. Namun, diketahui
bahwa commision expense untuk commercial ficture adalah flat 5% dan
dapat mencapai 12% commision adjustment, biayanya tidak berubah
berdasarkan number of sales, sehingga sebaiknya commision expense
untuk commercial fixture dikategorikan ke dalam Channel
Expenses.Wholesale suppliers2. Catalog Expense- Semua Sweet Catalog
Expense dialokasikan ke Channel "Contract Distributor'- Catalog
Expense yang mencakup beberapa channel dialokasikan menggunakan
cost driver sales dollar pada setiap channel berdasarkan jumlah
outlets- Semua Sweet Catalog Expense dialokasikan ke Channel
"Contract Distributor' sudah dialokasikan dengan benar- Catalog
Expense yang mencakup beberapa channel dialokasikan menggunakan
cost driver sales dollar in each channel berdasarkan jumlah outlets
tidak sepenuhnya benar, karena misalnya untuk Catalog Expense
Incandecent Commercial sebaiknya dialokasikan seluruhnya ke Channel
Contract Distributor karena berdasarkan pengamatan yang dilakukan
Channel Industrial Supplier tidak membeli fixtures berdasarkan
katalog.- Untuk channel lainnya yang tidak didedikasikan
menggunakan katalog dapat dialokasikan dengan cost driver sales
dollar pada setiap channel berdasarkan jumlah outlets.Contract
distributors3. Advertising ExpenseSales volume in each channelTidak
setuju. Advertising Expense berupa publikasi di majalah dan acara
show tidak dapat ditelusuri dengan akurat ke product line dan
channel, sehingga sebaiknya Advertising Expense dikategorikan
kedalam "Channel Expenses".Industrial suppliers4. Cooperative
Advertising ExpenseTidak menggunakan cost driver karena Cooperative
Advertising Expense dapat langsung dialokasikan ke channel (Mass
Mechandising dan Wholesale Supplier).Setuju.Government5. Sales
Promotion ExpenseTidak menggunakan cost driver karena Sales
Promotion Expense dapat langsung dialokasikan ke product
line.Setuju. Hal ini didukung dengan sistem pencatatan Sales
Promotion Expense berdasarkan product code.Original Equipment
Manufacturers6. Warranty Expense- Expenditure lebih dari $10,000
tidak menggunakan cost driver karena dapat langsung dialokasikan ke
channel yang bersangkutan- Expenditure kurang dari $10,000
dialokasikan menggunakan cost driver Sales Volume product line pada
channelSetuju. Mempertimbangkan Warranty expense secara total hanya
1% dari total marketing expense.Product Lines7. Cash Discounts
ExpenseDay's Sales Outstanding (DSO) large representative accounts
pada setiap channelSetuju. Namun perlu diberi batasan spesifik
mengenai larga representative accounts berupa jumlah sales
dollarFixtures:Consumer Incandescent FixturesGeneral &
Administration ExpenseConsumer Flourescent Fixtures8. Customer
Service ExpenseTidak menggunakan cost driver. Biaya dialokasikan
sesuai estimasi manajemen berdasarkan besarnya konsentrasi customer
service untuk masing-masing channel.Tidak setuju. Alokasi Customer
Service Expense tidak dialokasikan berdasarkan data kuantitas,
sehingga kurang akurat. Maka sebaiknya Customer Service Expense
dikategorikan sebagai "Channel Expense".Commercial Recessed
Fixtures9. Marketing Management Expense- Marketing management
expense untuk functional manager tidak menggunakan cost driver
karena dapat langsung dialokasikan ke channel berdasarkan fungsinya
yang terpisah- Marketing management expense untuk support function
manager, bila memungkinkan, dapat dialokasikan ke masing-masing
channel, apabila tidak, maka dialokasikan berdasarkan sales
dollarsTidak setuju. Alokasi marketing management expense untuk
support function manager sebaiknya dikategorikan sebagai "Channel
Expense" karena pengalokasian dengan cost driver yang tidak tetap
dapat menciptakan kebingungan dan kemungkinan tidak akuratnya
pengalokasian semakin besar. Selain itu, pengalokasian berdasarkan
sales dollar kurang tepat karena product line dengan harga yang
lebih mahal cenderung akan mendapat alokasi biaya lebih besar,
padahal tidak secara otomatis berhubungan dengan gaji
manager.Commercial Fluorescent Fixtures10. Sales Policy
ExpenseBiaya dialokasikan ke masing-masing channel sesuai estimasi
manajemen, lalu dialokasikan ke product line berdasarkan sales
dollars.Tidak setuju. Alokasi Sales Policy Expense tidak
dialokasikan berdasarkan data kuantitas, sehingga kurang akurat.
Maka sebaiknya Sales Policy Expense dikategorikan sebagai "Channel
Expense". Selain itu, pengalokasian berdasarkan sales dollar kurang
tepat karena product line dengan harga yang lebih mahal cenderung
akan mendapat alokasi biaya lebih besar, padahal tidak secara
otomatis berhubungan dengan tingkat dispute claim.Commercial
Track11. Marketing Travel and Entertainment Expense- Marketing
travel & entertainment expense yang dapat ditelusuri ke orang
yang mengajukan expense report dapat dialokasikan ke channel yang
bersangkutan- Marketing travel & entertaimnet expense yang
tidak dapat ditelusuri ke orang yang mengajukan expense report
(karena tidak ada regional manager), maka dialokasikan berdasarkan
kombinasi antara estimasi manajemen dan sales dollar.Tidak setuju.
Alokasi Marketing travel & entertainment expense sebaiknya
dikategorikan sebagai "Channel Expense" karena pengalokasian dengan
cost driver yang tidak tetap dapat menciptakan kebingungan dan
kemungkinan tidak akuratnya pengalokasian semakin besar. Selain
itu, pengalokasian berdasarkan sales dollar kurang tepat karena
product line dengan harga yang lebih mahal cenderung akan mendapat
alokasi biaya lebih besar, padahal tidak secara otomatis
berhubungan dengan kenaikan/penurunan marketing travel &
entertainment expense, seperti Government channel yang menghasilkan
sales dollar paling kecil mungkin saja mengeluarkan biaya
entertainment yang cukup besar.Commercial Ceiling Fixtures12.
Postage ExpenseJumlah Catalog Expense masing-masing channelSetuju.
Karena dijelaskan bahwa mayoritas Postage Expense adalah untuk
Catalog.Commercial Wall Fixtures13. Admin Travel and Entertainment
ExpenseBiaya dialokasikan ke masing-masing channel sesuai estimasi
Director of Marketing, Pricing Manager, Marketing AnalystsTidak
setuju. Alokasi Admin travel & entertainment Expense yang
dialokasikan berdasarkan estimasi adalah kurang akurat dan
cenderung menghasilkan alokasi yang subyektif dari masing-masing
director/manager. Maka sebaiknya Admin travel & entertainment
Expense dikategorikan sebagai "Channel Expense".Commercial External
Fixtures14. Warehousing ExpenseInventory level masing-masing
product line, lalu dialokasikan ke masing-masing channel
berdasarkan sales levelSetuju.15. Meetings ExpenseBiaya
dialokasikan berdasarkan estimasi manajemen.Tidak setuju. Alokasi
Meeting Expense yang dialokasikan berdasarkan estimasi adalah
kurang akurat dan cenderung menghasilkan alokasi yang subyektif.
Selain itu, meeting expense merupakan corporate level expense. Maka
Meeting Expense dikategorikan sebagai "Channel Expense".16. Fixed
ExpenseBiaya dialokasikan oleh masing-masing departemen sesuai
rutinitas, lalu dialokasikan ke masing-masing channel berdasarkan
managerial judgment.Tidak setuju. Alokasi Meeting Expense yang
dialokasikan berdasarkan managerial judgment adalah kurang akurat
dan cenderung menghasilkan alokasi yang subyektif. Selain itu,
Fixed Expense merupakan biaya tetap yang tidak berubah seiring
dengan kenaikan/penurunan sales dari masing-masing channel. Maka
Fixed Expense dikategorikan sebagai "Channel Expense".