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A distiller increases whiskey production and income declines because of accounting methods in use. Questions are raised regarding the treatment of expenditures which can be classified as production, inventory, or period costs. The necessary aging process raises added questions about prior period restatements and needed financing. A rewritten version of an earlier case by R.F. Vancil and R.H. Deming.

Spreadsheet Supplement for case 189065.

A series of eight vignette cases designed to be taught in one classroom session. This case describes a potential problem in the way that General Electric has billed the government under a large defense contract. Designed to allow students to discuss what actions top managers and the Department of Defense should take at each step in the proceedings. Sets the stage for the follow-up case, General Electric: Compliance Systems. Facts and Figures on Defense Procurement is intended to be used as supplementary reading in teaching this case.

Supplements General Electric: Valley Forge (A).

Supplements General Electric: Valley Forge (A).

Supplements General Electric: Valley Forge (A).

Supplements General Electric: Valley Forge (A).

Supplements General Electric: Valley Forge (A).

See General Electric: Valley Forge (A).

After General Electric (GE) is indicted in 1985 for defrauding the Department of Defense, Chairman John F. Welch takes dramatic steps to prevent a recurrence. This case documents the new systems and procedures that are put in place to ensure that all GE employees are aware of the boundaries of acceptable behavior. Closes with a discussion of the benefits and costs of Welch's approach. A follow-up to General Electric: Valley Forge (A--H). Facts and Figures on Defense Procurement is intended to be used as supplementary reading in teaching this case.

A company needs reliable information on product costs. But sometimes it's difficult to know if a cost system is failing to deliver. It's time to redesign a cost system when, for instance, manufacturing managers want to drop products that seem to earn the biggest profits. Chances are those items are more troublesome than the cost system reflects. Also, when departments develop their own cost systems, it probably means the old one is no longer working properly. Sometimes changes in a company's product market strategy or competitive environment can render a cost system obsolete. When margins are paper thin, companies need more accurate costs than ever.

An auditor is planning the audit of a new client, Acme Hardware. For preparing the audit plan, he becomes aware of the possibility that certain managers might be using accounting flexibility to aid them in qualifying for incentive bonuses based on profitability. The areas are inventory and advertising. The auditor must decide what action, if any, to take.

Roy Rogers Restaurants is a subsidiary of Marriott Corp. which sells franchises to own and operate standardized fast food restaurants. Many franchise owners operate more than one restaurant. One of these, presently operating 16 restaurants and committed to develop 30 more by 1992, has asked to remove the salad bar from some of his restaurants. The salad bar is a unique feature required by Roy's franchise agreement, and allowing its removal threatens standardization of the chain.

Describes a corporation that switches its philosophy of budgeting from "stretch" targets to "minimum performance standard" targets. The change has implications for management incentives, compensation, and corporate planning. Early results suggest the concept was not implemented well, even if it was a good idea.

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.

Examines Siemens' policy for pricing products transferred between the manufacturing and sales divisions of their Electric Motor Works, where both are profit centers. It is unique in that the organizational linkage between the product costing system and the transfer pricing system is highlighted. The issues raised center around the behavior induced by the transfer pricing system coupled with each manager's incentive to increase divisional profits. In addition the students will have an opportunity to discuss the appropriateness of both the transfer pricing system and the profit center structure of the organization.

Explores the issues surrounding the determination of the product cost of a subassembly in a firm that has never had to determine subassembly costs. Asks students to change the cost system by adding allocation bases and developing a step-down allocation process.

Explores the obsolescence of a cost system when technology changes. In particular, it asks students to increase the number of cost center and allocation bases. The firm moves from a one-center, direct labor-hour system to a three-center, direct labor-hour and machine-hour systems.

Managers in companies selling multiple products are making strategic decisions about pricing and product mix with distorted cost information, detecting the problem only after their competitiveness and profitability have deteriorated. An alternative is activity-based costing. Virtually all of a company's activities exist to support the production and delivery of today's goods and services. Companies need not scrap their official cost systems to use activity-based methods. The two can exist simultaneously.

Texas Instruments implements a Cost of Quality (COQ) system as part of a company-wide "Total Quality Thrust." After several years of operation, group management questions whether or not the COQ system should be updated to make it more useful in identifying areas for quality improvement. The case documents the current system and asks students to analyze the role it played in the quality control process and areas in which it could be improved.