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Defines types of costs--current, sunk, opportunity, relevant, differential--and their use in management and management decision making. Contrasts single-period and multiple-period cost analysis.

Ramsey Walker, a second-year MBA student, must decide how to control a family business as an absentee owner. After providing background details on the publishing industry, the case requires the reader to: 1) make a product segmentation decision; 2) prepare a profit plan; 3) calculate free cash flow effects; 4) determine key accounting performance measures; and 5) assess new control systems and their implementation.

Second of a two-part case on the development and use of a Balanced Scorecard (BSC) at Mobil's US Marketing and Refining Division. This case describes the completed BSC, and how this was linked to the BSCs of the independent business units and the internal service organizations. Also describes the linkage of the BSC to managers' compensation through a new variable-pay plan. Concludes with the senior executives reflecting on how they are using the BSC in their management reviews. Focuses on the management processes surrounding the use of BSC. May be taught with Mobil USM&R (B): New England Sales and Distribution, (C): Lubricants Business Unit, and (D): Gasoline Marketing, which describe the development and use of BSCs in two independent business units and one staff department.

Spreadsheet Supplement for case 197084

Explores Toyota's target costing system, considered to be the most advanced such system of any major Japanese manufacturer. Specifically, describes Toyota's process of setting rigorous cost-reduction goals and the steps taken to achieve them.

An independent regulated telephone company has established a computer services subsidiary that seems to remain unprofitable. Managers must determine whether it is profitable or not and consider changes in pricing or promotion that might improve profitability. A rewritten version of an earlier case.

CompUSA was performing poorly until new management reorganized and redirected the business. Consequently, CompUSA became the top retailer in its industry. Management outlines its future plans.

A competitor has developed and introduced a superior product that is less costly to manufacture. Precision Worldwide must decide whether to match the competitor's product, when to do so, and how to price, given that it holds a large inventory of its now inferior product.

An independent telephone company needs to acquire a new truck for use in telephone line installation and maintenance and must decide whether to buy or lease the truck. The company must address the rate of return in a regulated industry and the best accounting treatment if the truck is leased.

Spreadsheet Supplement for case 197103

A company must decide whether to acquire new equipment to offer a new product line. The question is whether equipment will meet return on investment targets considering depreciation and taxation of profits. The equipment is acquired, but one year later better equipment becomes available. A rewritten version of an earlier case.

Discusses the purpose of independent audits of financial reports, the nature of audits and auditing, types of independent auditor opinions, and changing expectations of those who use and rely on audits.

Describes the cost control system used at an automobile engine plant for labor and overhead costs. The finance staff prepares daily, weekly, and monthly variance reports against budgets. Department supervisors, finance staff, and the plant manager discuss the use and interpretation of these reports. Also describes the company's budgeting procedures, which include a performance improvement factor to motivate annual productivity gains and cost reductions. Allows the class to discuss whether the extensive and detailed variance analysis systems promote valuable managerial objectives such as cost control, learning, and improvement. A big issue is whether an emphasis on meeting short-run budgets inhibits longer-term improvements in quality and productivity.

A newly reopened automobile engine plant has been organized along total quality and teamwork principles. Employees now solve problems and ensure quality, rather than watch parts being produced. New operating and financial systems have been installed to promote continuous improvement, waste elimination, and cost reduction activities.

Describes applying activity-based costing to manage customer relationships. Links cost-to-serve to net margins earned with individual customers.

Sensormatic is a leading provider of security systems to the retail industry. The company relies on customer financing as a key component of its strategy. The company's growth strategy and accounting is attacked by short-sellers and the financial press.

Describes how activity-based costing (ABC) should be applied with: 1) budgeted, not historical, expenses and 2) assigning the costs of capacity resources.

Spreadsheet Supplement for case 197041

The owner of an ice cream company must evaluate the performance of three regional businesses. To do the analysis, students must flex the budget by seasonal temperature; calculate revenue, volume, price, and efficiency variances; analyze the effects of transfer prices; and calculate return-on-investment. In addition, the owner considers how to set strategic boundaries and how to compensate his managers.

Managers introduce a new performance evaluation system based on sales growth and return-on-investment (ROI). A branch manager wonders whether his new warehouse should be leased to mitigate the impact on ROI. Formulas and performance calculations are provided. A rewritten version of an earlier case.