Unit 1 assignmant

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If the number of items served is the cost driver, for a single month the depreciation on restaurants world is a fixed cost. Over several years, if sales are strong, a strategic
decision will be made to open additional restaurants; if sales are weak, strategic decisions will likely be made to close some items. Hence, over a multiple-year period, the number of items varies with sales volume, making depreciation appear as a variable cost with sales revenue as the cost driver.
For the purpose of developing plans for extended time periods, it is more appropriate to consider possible variations in one or more strategic cost drivers. When this is done, many costs otherwise classified as fixed are better classified as variable.

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3-52 Executional Cost Drivers; Internet Retailer Assume that you are a consultant for a start-up Internet retailer, Bikes.com, which provides a variety of bicycle parts and accessories in a convenient and effective customer service approach. The firm operates from an office building and nearby warehouse located in Danville, Virginia. Currently, the firm has 10 permanent administrative staff, 6 customer service representatives who respond to customer inquiries, and 12 employees who pick, pack, and ship customer orders. All orders are placed over the firm’s website. An 800 telephone number is available for customer service. The firm’s sales increased at about 20% per year in the last two years, a decline from the 50% rate in its first three years of operation. Management is concerned that the decline will delay the firm’s first expected profit, which had been projected to occur in the next two years. The firm is privately held and has been financed with a combination of bank loans, personal investments of top managers, and venture capital funding.

Required What specific executional cost drivers are important in this business? How should the firm use them to improve its sales rate?

2-56 Value Chain; Harley-Davidson Harley-Davidson Inc. (HD) is one of the most recognized brands worldwide. The motorcycle manufacturer has one of the most loyal owner groups of any company. Unfortunately, the firm’s success has come at a price. Harley has a reputation that drives some customers away and a “this is for a different generation” effect on some potential younger customers. Other potential customers are simply intimidated at the idea of riding a 4001 pound Harley-Davidson. To deal with these concerns, and to try to encourage new owners, HD developed the Rider’s Edge program in which anyone who could pass the Motorcycle Safety Foundation’s written test and driving test would be eligible for instructions on how to ride a Harley. The instructions are provided by local dealers. Another new program at HD is intended to attract women. HD publishes Harley Women magazine and has introduced a new bike, the Super Low, which has a lower seat height, sells for a lower price, and is more than 150 pounds lighter than the usual Harley.

Required where do these two new programs fit in the Harley-Davidson value chain? From a value- chain perspective, how do these programs support the firm’s strategy?

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Ethics; Product Quality HighTech, Inc., manufactures computer chips and components. HighTech has just introduced a new version of its memory chip, which is far faster than the previous version. Because of high product demand for the new chip, the testing process has been thorough but hurried. As the firm’s chief of operations, you discover after the chip has been on the market for a few months and is selling very well that it has a minor fault that will cause hard- to-discover failures in certain, very unusual circumstances.

Required Now that you know of the chip’s faults, what should you disclose and to whom should you disclose it?

It should be disclosed to the department that can focus its interest on the product manufacturing and research so that the future products are free from any defects

I will tell them about the fault and the effect of the fault that can be caused