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Kanthal Case Study Solutions INTRODUCTION Kanthal is company that specializes in the production and sales of electrical resistance heating elements Kanthal has about 10000 customers and they produce about 15000 items The company consists of three divisions and these three divisions are as follows 1Kanthal Heating Technology - 25 global market share 2Kanthal Furnace Products - 40 global market share 3Kanthal Bimetals - Manufacturer of one of the few fully integrated temperature control devices Mr Ridderstrale who became the President of the company in 1985 developed and implemented a plan that has involved completely changing and over-hauling their pre-existing traditional cost system The new plan has been installed with the hopes that it will provide more accurate information about their manufacturing cost structure as well as the costs of supplying individual customers and orders With this new information Kanthal plans to redirect its resources to customers with hidden profits and reduce efforts that are focused on customers with hidden losses The ultimate purpose for this system change is to achieve higher growth and profitability PROBLEMS ANSWERS SOLUTIONS Question 1 Why have selling administrative costs not traditionally been traced to individual products and customers Answer 1 Under the old costs system Kanthal management felt that selling and administration costs were fixed costs and as a result they could not be changed manipulated or utilized to influence growth or profitability Traditionally Kanthal had considered SE expenditures to be period costs and were expensed in that manner rather than allocating them to the various product lines and customers Under the old system management failed to realize that some of their customers placed heavy demands on the organization while others did not Therefore no attempts were made to allocate SA costs to the customers or product lines As a result costs were spread evenly and the focus of the sales force was on volume rather than the percent profit margin or
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