Hello Everyone , 1. Describe Differential analysis to drop/keep customers Depending on the type of business there could be a need to drop a customer. I know in certain industries customers are always valued in numbers. In chapter 7 we read about an accounting firm Phillips Accountancy that has certain customers that are no profitable. Management was able to do a differential Analysis to determine that the best course of action is to drop unprofitable customers. By having data that is very black and white we can clearly see how the unprofitable customers are not benefiting Phillips Accountancy’s bottom line. I remember when I worked at Walgreens in the pharmacy. The company made the decision to not accept certain local government funded …show more content…
In chapter 7 we read about a Barbeque company. Management decided to use an income statement to determine the profitability of continuing to sell charcoal grills. In the analysis we take into account the fixed costs and direct costs of carrying charcoal grills. In the end we can see that the company should not eliminate charcoal grills. The analysis for product line takes into account many factors. Those factors include salary and department costs for those working in the charcoal grill department. Again I bring up my experience at Walgreens. The company had made the decision to carry more store brand medication products. This decision was made when there was a period of time where the shelfs were empty. The shelves were not stocked and product availability was limited. This limitation had to do with the 2010 recall of certain Johnson and Johnson products. After the recall was over and most patients had become familiar with store brand products, there was a decision to bring back a very limited amount of brand name Tylenol and Motrin. The decision was based off ales data and profitability using differential …show more content…
The decision to make a product requires appropriate production equipment, suitable personnel, material, adequate space, supervision, design standards and involves overheads, maintenance, taxes, insurances, management attention and other indirect and hidden costs. To outsource or buy products allows lower investment in facilities, smaller labor force, less handling, lower plant cost for building and upkeep, less overhead or taxes, insurance and supervision. There is also the option of purchasing certain completed parts from a outsource country and assembling them in house. This decision would all have to be made after a detailed analysis is done. There are a lot of factors to include in this analysis. I personally agree with outsourcing certain factory work to countries that can produce the product cheaper. The cheaper product production costs make the cost lower for me as a