Allied stationary products
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Stationary Products A case study in Activity Based Costing -You guys know who we are.
description
Learn about Activity Based Costing
Transcript of Allied stationary products
Allied Stationary ProductsA case study in
Activity
Based
Costing
-You guys know who we are.
Distribution Center Customer
$
TFC Operations
Price and Cost
$4.7%
20.5%
7%
A B
Distribution Center Customer
$
Customer A
Distribution Center Customer
$
Customer B
Turns out…
Series10
10
20
30
40
50
60
Profits
Look Closely…
$4.7%
20.5%
7%
A B
ABC
$
A B
Profitability- Customer A vs. Customer B
Customer Profitability Analysis
Old Method Customer A Customer BSales 79320 79320Product Cost -50000 -50000Service Fees -16100 -16100Gross Profit 13220 13220Gross Profit % 17% 17%
Activity-Based Analysis Customer A Customer BSales 79320 79320Product Cost -50000 -50000Service Fees -10510 -30093Gross Profit 18810 -773Gross Profit % 24% Negative
• Weird for a service business: Less service means more profits
• A-type customers paying for services that B-type utilize
• “Inverse of Insurance” Business Model
Profitability Inferences
Top 15 (Small is bad) (bubble size = contr./ABC)
10 20 30 40 50 60 70 800
20
40
60
80
100
120
140
Product cost
NetSales
10 20 30 40 50 60 70 80 900
20
40
60
80
100
120
140
Product Cost
Net Sales
Bottom 8 : Big is bad (bubble size = -contr./ABC)
0 10 20 30 40 50 60 70 80 900
20
40
60
80
100
120
140
Y-Values
• Remember the value proposition:
TFC is about service not the product
Customer B needs the service more
How do we make money
Aircraft maintenance example
SBP? Value Based Pricing
True Overhead in Value Based Pricing …
Things customer wouldn’t do w/o TFC
Value Value
Redefine business model…
Price of the form +
Just-in-time serviceTotal Price =
Rent25%
Depreciation4%
Utilities3%
Salaries payroll13%
Fringe benefits-salaried3%
Hourly payroll - admin
Variable warehouse
payroll25%
Warehouse fringes
6%
Data proc.11%Costs taken care…
JiT Service Pricing
More form movement … higher price
Distribution Center Customer
$
We love Customer B
Other Recommendations• ASP needs to address rent and warehouse
payroll as the number 1 & 2 cost drivers in overhead
• Warehouse automation
• Eliminates labor costs
• Warehouses efficiencies-
• Ordering
• Transportation for Requisitions
• Eliminate Boxes
• Charge premium for desktop delivery
Allied Stationary ProductsA case study in
Activity
Based
Costing
-You guys know who we are.
