3-53 If the number of items served is the cost driver, for a single month the depreciation on restau

3-53
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.

3-52
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?

1-33
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

 
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