RELATED TITLES

502 views 0 0

Case Colorscope
Uploaded by Ratin Mathur 
Management Accounting Full description

   
Save Embed Share Print How To Win Capital Gaines: Smart Principles: Life and
Friends and Things I’ve Learned by Work

Case : Colorscope, Inc.

 RELATED TITLES
502 views 0 0

Case Colorscope
Uploaded by Ratin Mathur 
Management Accounting Full description

   
Save Embed Share Print How To Win Capital Gaines: Smart Principles: Life and
Friends and Things I’ve Learned by Work

Analysis
Q1) What is the external environment that Colorscope currently faces?

A1)

• Cheaper technology is lowering entry barriers

• Better technology is eroding uality!based competitive advantage
• "ntense competition from#
o $mall stand!alones
o %arge national chains
o Bac&ward 'vertical) integration by large printers
o "ntense price pressures( and erosion of rents 'high margins)

Q) What has Colorscope*s competitive advantage been( and why?

A)

• +eputation for uality , poor uality is extremely costly because

o -re!press is the last stage at which an error can be detected
o .ista&es in advertised price can be expensive for content provider to honor
o .erchandisers ta&e great pride in their catalogs
o /ast turnaround , this is very valuable to the content provider because it gives
time to decide( for example( how much to discount which items 'i0e0 it gives them
time to observe their competitors actions in a fluid environment
• Actual costing differs from normal costing in that overhead allocation rate  actual overh
actual volume of base
o 3his is ex post allocation rate , if actual overhead will not be &nown till year!end(
can only be determined then

/or Colorscope( we have actual( as opposed to budgeted data( so this is an illustration of actual

Q4) 5ow many overhead cost pools are appropriate for Colorscope?

A4)

• 3he 6 departments , preparation( scanning( assembly( output and Quality Control

• 3hese are the ma7or stages in the production process( and hours are not cloc&ed in these
departments in fixed proportion '8xhibit!9)
 RELATED TITLES
502 views 0 0

Case Colorscope
Uploaded by Ratin Mathur 
Management Accounting Full description

   
Save Embed Share Print How To Win Capital Gaines: Smart Principles: Life and
Friends and Things I’ve Learned by Work

• 3his is called !stage allocation system

2-Stage Cost Allocation System

Begin with first stage allocation

• Wages are already trac&ed by department '8xhibit!11)

• 8uipment depreciation is also trac&ed by department
• +ent has to be allocated to the departments
o ;sing floor space as the allocation base ma&es sense
• <other= overhead has to be allocated to the departments
o We could use labor hours as the allocation base( since this is available
 RELATED TITLES
502 views 0 0

Case Colorscope
Uploaded by Ratin Mathur 
Management Accounting Full description

   
Save Embed Share Print How To Win Capital Gaines: Smart Principles: Life and
Friends and Things I’ve Learned by Work

Cost per Page

Customer ouse Pro4it

Pro4its1 #e(enue1
=et Cost1Page #eorB1 #eorB1 be4ore
7ob8 Pages Page #e(enue Page
Pro4it %2'-%&' Page Page #eorB
%&' %2'
%' %' %&'E%'E%'

+&//& 1 !>:(144 !>6 >9(@@ >@@ >6 >4 >1@4

+&//2 1 !>1(164 !> >9(@@ >@@ > >199 >1
+&// 4 >6(:6 >11 >4(@@@ >19 >6: >11
+&&/& 1 >6(19 >46 >1(@@@ >6@ >:6 >46
+&&/2 1 >:(4 >9@ >11(@@@ > >49 >9@
+&2/& 1 >:(16 >1 >11(@@@ > >: >1
+&2/2 4 >1@(1 >41 >4(@@@ >19 >:@1 >41
+&2/ 4 >(:16 >4 >(@@@ > >:6 >4
+&2/ 4 >( > >@(@@@ >6 >49 >
+&/& 1 !>(66 !>@ >6@(@@@ >491 >:11 >4 >16 >1
+&/& 1 >9: >1 >(@@ >: >: >1
+&/2 1 !>1(:@6 !> >(@@@ >6@@ >6 >@ >14
+&/ 1 !>1(61 !>96 >(@@@ >6@@ >696 >1 >11
+&/ 1 >@ >: >9(@@@ >64 >61: >:
+&/> 1 >1(96 >1 >9(@@ >14 >:9@ >1
+&>/& 1 >(:@ >16 >11(@@@ > >64 >16
+&>/2 1 >:1 > >11(@@@ > >1 >1@ >19
+&+/& 4 >(: > >@(@@@ >6 >49 >
+&+/2 : !>@ !>6 >(@@@ >6@@ >66 !>6
+&+/ : !>1(: !>46 >1(:@@ >46@ >@ >41 !>:1
+&/& 1 !>4 !>6 >(@@@ >6@@ >6@6 !>6
+&/2 1 >1(@9 > >1@(@@@ >6 >6:9 >
+&*/& : >: >1 >:(@@@ >1(@@@ >4 >4 >6
+&/& : !>1(:6 !>44 >(@@@ >6@@ >4 >4 >9
+&/2 1 >4(:: >1 >1(@@@ >6@ >64: >1
+2//& 1 !>64 !>64 >@ >@ >64 !>64
!otal >> )>/,/2& )*+ )&>,2// )&>,> )&,> )&,& )+ ),&>/

"$at s$oul Colorscope o about t$e cost13uality traeo44

• -rice customer initiated rewor&

• +estructure production seuence#
prep !E scanning !E QC !E assembly !E output !E QC
• $hort term# cost can be bear by the company
• %ong term# customer initiated rewor& should be charged