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The ARES team formally proposes that Burlington Northern implement the ARES system. The project meets resistance. In light of financial restructuring and high level of debt, executives wonder whether the company can afford ARES. Weak links during the ARES development process to corporate strategic planning, corporate capital planning, and other corporate functions raise concerns. Executives also worry about whether their 100-year-old, traditional organization can adapt to and exploit ARES's modern electronic technology. When ARES team members' zealous advocacy of the project raise concerns about objectivity in evaluation, an outside consultant is hired to audit benefits, technologies, and whether benefits can be unbundled and implemented selectively.

Tennessee Controls has instituted a new formal asset acquisition process to rank competing proposals. Judy Starnes, the new division manager, is asked to rank three proposals by using techniques to quantify economic returns, risk, as well as the credibility of the individuals submitting the proposals. The calculations, which take students approximately 30 minutes to perform, attempt to reduce each complex proposal to a single number. Discussion in class permits role-playing as well as an opportunity to evaluate the strengths and weaknesses of a very mechanistic approach to critical strategic issues.

Focuses on the three-way interaction among internal controls, employee behavior, and incentives. Salesmen are illegally providing kickbacks to customers of this beer-distribution firm. In turn, salesmen are reimbursing themselves by filing fraudulent expense reports. The owner/president of the business faces a difficult decision: if he fires the individuals involved, he risks a total business shut-down. Closes with the question of how to improve internal controls to avoid this type of occurrence in the future.

Describes the actions taken by the owner/president to resolve the dilemma.

More and more managers today are changing their company's performance measurement systems to track nonfinancial metrics like quality, customer satisfaction, innovation, and market share. They believe these measures reflect a company's economic condition and growth prospects better than its reported earnings do. New technologies and more sophisticated databases have made the change to nonfinancial performance measurement systems possible and economically feasible.

The president of Noranda Minerals is evaluating the Environmental Management System in his resource-based company. The company undertakes an environmental audit, and the president must identify various stakeholders and prioritize their needs. He must decide if an environmental annual report should be made public. This case also underlines the increasing importance that qualitative considerations have in the financial decision-making process. Noranda Mines is a useful tool to discuss possible revisions to financial accounting and auditing standards in addressing environmental questions. (A sequel to this case is available, titled Noranda Minerals (B), case 9A91B009.)

The president and owner of a food service business, is concerned about the manner in which his industry prices goods and services. His firm has failed to meet his desired profit margin, and he wonders if there are different pricing options. This is an introductory case in the use of an activity based costing system in the marketing and distribution part of the business.

John Moser is assigned the task of instilling quality thinking throughout the firm. He begins by trying to identify what poor quality is currently costing. Hopefully, he can develop a strategy to improve quality in the firm.

Circuit City sells consumer electronic equipment, appliances, and extended service and warranty contracts which supplement those provided by equipment manufacturers. Equipment is sold at low margins, while warranties carry very high margins. A question has been raised about the proper method for recognizing revenues on the warranty portion of the combined sale. Deferring revenue will cut profit reported at the time of sales but may better match costs of warranty service.

For the first time, the Commonwealth Blood Transfusion Service (CBTS) has to determine product costs for the output of its plasma fractionation center. The motivation for determining product costs is political in nature. Therefore, the CBTS has to find a way to report individual product costs despite the fact that they are joint products. Because of the political motivation, CBTS executives cannot argue that there is no meaningful way to allocate joint costs to products. The case provides students with an opportunity to identify several allocation procedures for determining joint costs and then use those procedures to determine product costs.

Introduces the concept of cost variances. Looking at a bicycle manufacturer with one product and three departments, the case presents budgeted and actual data for material, labor, and overhead.

Spreadsheet Supplement for case 191084

Banking company noting declining profitability from its traditional lending activities has started to measure the total profitability of its lending relationships. A loan pricing model estimates the profit and return-on-equity from commercial loans. Additional work was required to recognize the revenue from fee-for-service business for the same customer that is performed by other units in the bank. The case raises the problem of how revenues and expenses from diverse activities can be combined to produce an accurate picture of customer profitability.

Queensferry Telecommunications Division has recently implemented an activity-based cost system. The case explores several issues. First, the role of variance analysis in an activity-based system. Second, the way to determine cost drive rates. Third, the evaluation of incremental business.

Two whimsical situations are described to provide illustrations of situations where income taxes paid differ from the income tax expense that might be included in financial reports. In addition to illustrating that financial reported income may differ from taxable income, the case contains data, to allow students to discover the reasons for and nature of a deferred tax account.

The company has excess capacity. The case explores the various issues surrounding accounting for the cost of capacity. Several definitions of capacity can be discussed and accounted for.

Spreadsheet Supplement for case 191071.

Spreadsheet Supplement for case 191073

Explores how a cost system can help support a firm's decision to change strategies. In the process, the students are introduced to a simple activity-based cost system. Siemens Electric Motor Works found itself facing an increasingly competitive environment and so made a decision to move from mass production of specialty motors to the production of small lots of custom motors. In doing so, they found their old cost system led them to poor decision making. By switching to a simple activity-based system, more accurate product costs were computed, facilitating better divisional performance.

An emerging synthesis of financial strategies, organizational structures, and operating philosophies is revitalizing the publicly held corporation by addressing deep-seated structural weaknesses. This synthesis reflects three insights: the power of entrepreneurial motivation, the impact of balance-sheet restructuring and strict financial discipline, and the benefits of decentralizing authority and ownership.