Assume the role of one of the top, well-regarded CMAs. Identify the crucial issues in the case and address the problem. What can be done?
Tubes of All Sizes (TAS) manufactures a variety of tubes for many different customers. These pipes are different with respect to size (length, thickness and diameter), material, finish Coarse versus fine) and even color (green, red, yellow, black and navy blue). The typical manufacturing process consists of cutting the materials to desired lengths, grinding the cut pieces, forming (shaping) them, finishing the formed pipes, spray painting the finished pipes and packaging them in bundles of 25 pipes each. The pipes range from 2 feet to 6 feet in length, ½ an inch to 3 inches in thickness, and 6 to 18 inches in diameter TAS caters to three different types of customers: large, medium and small. The large customers buy only three times during a year in large quantities. The delivery is also made three times as per the order quantities. On the other hand, the smaller customers order many times and in smaller quantities. Besides, the smaller customers buy a greater variety of tubes (i.e., each order is likely to be different from the previous one). Consequently, TAS cannot anticipate the needs of the smaller customers
TAS's cost accounting system is tailored for the large customers in terms of how the data are captured. The activity cost driver rates are set based on the large customer's use of resources extrapolated for all customers. Prices are also set based on the large customers' consumption of resources. Karen Kent, the marketing manager, has not been very happy about the accounting system because the actual marketing costs have turned out to be much greater than what the accounting system has been suggesting. Similarly, Norman Neusom, the operations manager has also been troubled by the cost numbers. Both Kent and Neusom decided to meet with the controller Janet Hines, to discuss their concerns Hines: Karen and Norman, in my office together? I'm surprised!
Neusom: You shouldn't be, Janet. Didn't you guys tell us that we should all work together as a team? I have stopped fighting with my colleagues in marketing.
Kent: Let's just say that we are beginning to behave like reasonable adults
Hines: Isn't it nice to work as a team? However, it looks like we have a serious problem given that the two of you have come to my office together. Am I under attack?
Neusom: No attacks, no blame. We have a problem and we don't quite know where and how to begin Kent: Both Norman and I are getting messages that conflict with our wisdom regarding our individual functions (or processes, as we should say these days). It looks like our costing system is designed to handle the big guys (I mean our large customers) but does not estimate the marketing and sales related costs for the smaller customers. Consequently, I am unable to determine which customers are profitable and which are not. I would love it if our costing system could provide finer information
Neusom: Added to that, Janet, is the fact that these smaller customers seem to be upsetting my people too. There is something about these small customers' orders that throw my people off guard. They would love it if we got rid of all our small customers and take one or two more big guys. I am sure that would make Karen's life easy too
Kent: You are right, Norman. It would make my life easier but I do not know if I want to make that conclusion before I can better assess the situation
Hines:Let me see what I can do. I will also talk to a couple of my old buddies who are top CMAs and well regarded for their knowledge in cost management
Required:

Which of the Following Indicates That a Company May Benefit

Multiple Choice

Correct Answer:VerifiedUnlock this answer nowGet Access to more Verified Answers free of chargeAccess For Free

Correct Answer:
Verified
Unlock this answer now
Get Access to more Verified Answers free of charge