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Case Summary Digital Semiconductor was a business unit of Digital Equipment Corporation John Gavin the DS group controller wanted the finance department to find ways to add value and better support the division because the DS business strategy had many changes over the past five years and the division was still operating at a loss History The semiconductor division which was a part of Digital Equipment Corporation expanded rapidly in the 1970s Digital was financially very successful in 1988 However Digital faced huge losses in 1990 through 1994 In 1997 Digital returned to profitability because of the reorganization of Digital into business units and product lines Digital Semiconductor Chip designers start to consider cost along with pushing the envelope of science In the new product line organization Digital units needed from Both DS and outside suppliers Semiconductor Manufacturing Silicon Wafers Probe Assembly Test It is important to note that the cost structure went from a cost per wafer to a cost per die during the probe process Yield was very critical to the cost of the process Product lines A product line was defined as the integration of the activities of marketing product development and product engineering to manage a set of common products to achieve ROI DS was divided into six product lines representing their major microprocessor Question 1 I think the new system is better than old one First of all each product line would be measured with specific goals for profit contribution Furthermore all the financial performance would be measured individually ie revenues sales spending etc Therefore each product line would be more responsible and active for making profit And the product line would be charged a competitive manufacturing product cost for each of its products So each product line would control the cost As a potential product line manager I would explain the new system to my folks and let
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