Business

What is Kanthal's president, Ridderstrale, trying to accomplish?

• To develop an Account Management System was to find a process of determining the profitability of individual customer orders.

• An accurate account measurement system was needed in order to achieve a strategy for increasing growth and profitability without adding a significant amount of sales and administrative resources to handle anticipated increased sales.

• In order to carry out this strategy, a system was needed to allocate overhead expenses to the different categories of customers as well as products

• It was important that effort was taken to ensure that variable selling, general, and administrative (SG & A) costs did not increase faster than sales revenue

Why does he believe the previous cost system is inadequate for his purposes?

• All overhead expenses attributed to SM&A were pooled together and allocated based on volume-based drive, sales revenue.

• Under old system is was assumed that all customer orders placed the same demand on the resources of Kanthal

o Customers differed by:

• Level of technical and commercial service they required which placed fewer demands on Kanthal's resources would be overcosted