The service quality would stay the same and the original customers are also familiar with the company’s service and pricing system and could remain loyal to the company. Moreover, the current costing system and pricing system are consistent with the market niche strategy. Although there is a decrease in profitability, the company is still profitable and there is no risk of losing profits or customers since there are no changes. Disadvantages: The current costing system has some loopholes that result in the lack of efficiency, which in turn leads to the decline in profits.
Since the company pays the employees as it planned, there would be zero labor rate variance. The only existing variance that leads to the difference between planned budget and actual budget is labor efficiency variance. As we can see from appendix A, the major unfavorable efficiency difference is under minor band repairs, which is $34,800. Major jobs are performed by the three owners. Since the actual hour per job is the same as planned hour per job for major band repairs, labor efficiency variance does not exist for band major repairs.
As for orchestral major repairs, although there is one-hour difference between actual hours per job and planned hours per job, this does not result many differences for the reason that the workload is not very big and the three owners draw base salaries plus bonuses of 5% of sales revenues instead of hourly wages. Hence, the major difference causes the profit loss should be the low efficiency of band repairers. Moreover, since 35% of the job orders are from out of town and the company has to incur shipping fees of $35 per package.
The Term Paper on Cross-Cultural Differences Company X
A. Cross-Cultural Differences Company X is considering expanding its business to China. However, prior to moving into a new and foreign market, Company X must understand the various cross cultural differences that are relevant to properly conducting business in China. By being more sensitive to and understanding the cross-cultural differences, Company X’s transition into the new market ...
Thus, it also brings the loss in revenue. Alternative Two In alternative two, we suggest that we charge minor band repairs on a flat-fee basis and we pay workers also on a per-job basis. Alternative two thus provides the suggestion to solve the problem that discussed above. Advantages: As we discussed above, the company suffers from the low efficiency of band repairers. Not only because the high costs that have to be paid, but also due to the decreasing volume. To solve this problem, flat-fee basis can be adopted.
If the workers are paid on a per-job fee, workers are then more motivated to work more efficiently so as to get more work done thus get higher pay. As it is planned that it usually takes 2 hours to finish the jobto a band minor repair. Hence, the each job originally costs $40. The actual cost, however, is $60 per job. The wage can be set within 40-60. For example, the wage is $46 per job. If employees can finish each job order in two hours as planned, then they are paid actually $23 per hour.
This action could highly motivate the workers to work more efficiently. We can also charge the customers on a flat-fee basis. Currently, planned per job price is $60 while the actual per job price is $90. The price range in this case should fall between 60-90. We take 86 for example. Therefore, the company could earn $40 per order compared to the current gross profit, which is $30=$90-$60. Since the company adopts the market-niche strategy, its customers are sensitive to price changes.
Thus, as the prices declines, the demand would also increase. This method could bring both increases in gross profit and demand. Moreover, since the company expenses more than $50,000 this year to cover the shipping fees, a reasonable amount of shipping fees should be charged to make up for the losses. Disadvantages: In order to work as fast as they could to get higher pay, band repairers may work too fast that they ignore the quality of their jobs. The core of this business lies in the service that provides to the customer.
The Essay on Are the Company’s Prices and Costs Competitive?
Tutor: Date: Are the company’s prices and costs competitive? The pricing system as well as cost deployed by an organization contributes to a large part in its competitive edge. Notably, in the current competitive world meticulous consideration is crucial in both pricing and costing on either products or services. Considering pricing as well as costs in Xerox, an organization dealing in consumer ...
If the quality of service cannot satisfy the customers’ requirements, then the business would collapse as well despite the improved efficiency. Since the customers are price-elastic, charging shipping fees may decrease the demand from out of the town. Evaluation Criteria The listed criteria are in order of importance Profitability: the main problem that troubles the company right now is the declining profits. Hence, the key factor of evaluating an alternative is its profitability. It will be measured simply by calculating the net income earned by the company.
Feasibility: the suggested solution should be feasible and easy to implement. Effect of Quality: the suggested solution should maintain the quality of service and do not have negative effect on the service of quality. Strategic Consistency: the alternative should be consistent with its previous strategy. Comparison of Alternatives Alternative| Profitability| Feasibility| Effect of quality| Strategic consistency| 1| Stay the some or even less| Yes| Stay the same| Yes| 2| Probably increase| Yes| May decrease| Yes| Conclusion:
I recommend of selecting alternative two since it can solve the most important problem at this phase and also satisfies the other criteria. Steps to implement: 1. Notify employees who are responsible for minor band repairs that they are about to be paid on per-job basis. Negotiate with them to so as to arrive on the agreements. 2. Announce that minor repairs for band instruments are going to be charged on a flat-fee basis. 3. Announce that for out-of-town orders, the company is going to charge a reasonable amount of delivery fees, say $10 per package.
