Expert answer:comment in the cases
Expert answer:please make comment on every case, every comment half page, the comment reply in the case you may agree to some point or not agree or you can talk about some point in the caseNote:There are 7 cases I need 7 comments . Write the number of the case next to the comment
case_8_and_9.pdf
case_10.pdf
case_11.pdf
case_12.pdf
case13_and_14.pdf
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Case 8
5.3 Activity Based Costing and Marketing
Case Summary
The “Activity Based Costing and Marketing” Young Reader case focused primarily on the
high cost of marketing activities, specifically physical distribution, and how the Activity
Based Costing technique aids companies’ management in decision making. It also
touched on how the industry had changed in response to recommendations over the
years which led them to their current position and utilization of the Activity Based
Costing method. The ABC technique or method groups cost activities and attaches them
to specific cost drivers to create an accurate picture of the cost, rather than one
comprised of the traditional costing method which could leave out large portions of the
total cost. The case showed how ignoring the Activity Based Costing method could lead
to financial struggles as well as how it’s implementation could be used to course correct
and bring a company out of them, in addition to providing higher quality data for clearer
analysis.
The manufacturing industry faces high distribution costs. In fact, more than 50% of total
costs in numerous product lines are made up of marketing costs and are mainly
attributed to physical distribution. As detailed in the case, though there are many cost
advantages to Just – In – Time shipping in terms of inventory and cash flow, they are
largely negated in the manufacturing industry due the high costs of freight shipping,
which make it more cost-effective to ship and store in large quantities. These high costs
paired with the traditional method of costing led to a troubling outlook for manufacturers,
and more specifically, their marketing executives. In the 1960s, primarily in the years
between 1968 through 1973, marketing executives requested a better system to identify,
classify and allocate the costs associated with physical distribution from those in the
accounting profession. This led to the recommendation of and the eventual rise of the
use of the Activity Based Costing technique for marketing functions. Unfortunately, at
first, the recommendations at that time, to isolate the activities of major marketing
functions, identify cost drivers and utilize techniques which resemble what we now know
as the Activity Based Costing system, were largely ignored. The likenesses between
distribution activities and production activities simply went overlooked.
When examining the costs of manufacturing companies, production costs have been the
main focus while marketing costs have largely been overlooked. This method of
concentrating primarily on productions costs overlooks a significant portion of the
company’s expenses and ignores an important component of the total cost of their
products. Eventually, accountants attached new names to the techniques suggested in
the 1960s and they began to employ them in the way we are accustomed. This logical
system of allocating non-traceable costs to the cost object enables marketing cost
analysis and is responsible for producing valuable quantitative data. This data allows
marketing executives, as well as other functions of manufacturing companies, to make
educated decisions regarding profitability and pricing, as well as when it comes to
adding or dropping product lines or territories. Activity Based Costing techniques are
now, and will continue to be, applied to marketing costs to assist companies in
management decision making, as they should have been all along.
Relationship to Work Experience
The use of the Activity Based Costing technique within the manufacturing industry is the
primary focus of this case. This is an industry I am indirectly a part of as an employee of
one of the largest companies involved in manufacturing within the beauty industry,
L’Oreal USA. L’Oreal is a massive player in every market in which they participate, with
over 89,000 employees worldwide, 11,000 of which are in the US alone, they saw over 6
billion dollars in US revenue in 2016. The company was started over 100 years ago in
France by a scientist making hair dye before growing into the cosmetics company it is
known as today. It entered the US in 1953 and the US branch now has over 30 brands
spread across 4 divisions including Khiel’s Since 1851, Ralph Lauren Fragrances, Urban
Decay, Lancôme, Clarisonic, Garnier, Maybelline New York, Skinceuticals as well as
others. As was the situation outlined regarding the manufacturers within the case, one of
the biggest pieces of our supply chain is the shipping and distribution of our products.
In my position within the tax department of L’Oreal, on the Sales & Use team, I am not
directly connected to the manufacturing or marketing processes. My role is to provide
extensive assistance in our audit process through return support, among other things.
However, the case does apply directly to my work and the effects of the Activity Based
Costing method do make their way to me. This occurs through the grouped expenses
which are evident even in the way we organize our data. As part of the return support, I
identify promotional and marketing expenses that have previously been isolated through
the Activity Based Costing technique. The technique is executed by cross functional
teams which support individual divisions specifically by brand. Once the individual
brands have been tied to the division, their information is passed on to a wide range of
departments to be utilized for a multitude of purposes. This enables us to garner an
incredibly detailed vision of not just the company as a whole’s non-traceable costs, but
those of each division, and further, those of each individual brand. This detailed analysis
allows for decisions in other departments regarding brand value, future resource
allocation and distribution strategies. Within my department it allows us to be incredibly
specific in our reports, and on a more logistic note, trace back problems to their root if
there are any errors. The process of allocating costs according to the Activity Based
Costing technique is solely responsible for allowing this level of analysis and volume of
data for my team and all employees of L’Oreal USA.
Relationship to Course
While Activity Based Costing is beneficial for all employees of a company utilizing it, it is
especially valuable for managers. As we discuss in class, a successful manager needs to
be informed on the financial health of their company and able to make decisions based
on the information they have available to them. The Activity Based Costing method
allows for the most thorough analysis, which in turn allows for the most accurate
information to be at the disposal of managers. Without knowing the precise cost to
charge, as might be the case when using traditional costing, the company will struggle
due to the unaddressed expenses and their profits will most likely not be sufficient to
sustain the company successfully. Utilizing the ABC technique prevents this from
happening, as long as the correct cost driver is identified, and lets companies render
informed decisions.
Though it would be in a company’s best interest to operate using the most appropriate
costing system from the outset, the case presented an interesting angle outside of what
we examined in class and that is the use of Activity Based Costing as a vehicle for
course correction. The case cited manufacturers that were struggling with their
distribution costs for a significant period of time before they finally began using the ABC
technique. Once they implemented the new method, they were able to pick up the
expenses that otherwise had been being overlooked, which led to financial improvement
for the companies. This practical angle brought to light the companionable
implementation and effects of the Activity Based Costing method’s application once a
company has been up and running to that of a company who sets out using it from the
start.
Summary
The Activity Based Costing technique is integral to a company’s accurate cost structure,
especially in manufacturing companies. Assigning non-traceable costs to the cost object
allows for precise analysis and guarantees no component of their total cost is ignored.
This exactness enables executives and managers, as well as other employees, to make
educated decisions regarding everything from product lines to distribution territories.
The ABC method of costing brings many benefits to companies that use it and can
greatly improve the financial health of a company.
Case 9
9.7 Implementing Management Innovations Successfully: Principles for Lasting Change
Case Summary
Successful Implementation occurs when, ‘‘Managers and employees permanently alter
the way they perform their job responsibilities to conform to the principles dictated by a
particular innovation.’’
Unfortunately some organizations have not been able to successfully implement their
innovations, this is because most organizations do not alter the way they perform their
core job responsibilities to conform to the principles dictated by a particular innovation.
Innovation has become vital in this day and age where firms are constantly on their heels
trying to compete with rivals in order to gain a fair share of the market they find
themselves. In this regard, firms put a lot of human and financial resources into
innovation attempts only to see them fail on a recurring basis. They tend to use models
such as Activity-based cost management (ABCM), Total Quality Management (TQM) and
Business Process Reengineering (BPR) either separately or simultaneously to no
success.
All too often, change management is mostly focused only on the technical side, leaving
the human side with little emphasis on the human side. The technical side in this regard
refers to the machinery or resources needed to make this change successful. At the end
of the day, it is the human resource component of the organization that will operate these
machines in order to have a successful change. Equal time and resources if not more
must be allocated to the human side as the technical side. The human resources of any
organization has to be trained in the direction the change will be heading. This will allay
all fears they have of the new system and their skepticism. Its only when the human
resource are confident in the new system or procedure will the change take off smoothly.
Once you have a human resource who oppose any sort of change the management is
proposing, that change process will stall.
Medium term assessment of behavioral change can be assessed by using qualitative
measures such as attitudinal surveys and direct observation of behavior. � …
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