You are the product line manager for
a snow board manufacturing company based in Provo, Utah. As product line manager for the company’s Xtreme line, you are ultimately responsible for all aspects of production as well as the profitability of the line. You have direct authority over the production, marketing and sales of the company’s Xtreme line of snowboards. The first quarter sales figures are in and you see that sales are down and in several key markets you no longer hold the #1 position. You are concerned that when you attend the quarterly management meeting that this poor performance is going to be a topic of much discussion. Several months ago, you received information from an overseas manufacturer that can manufacture the bindings for the snow board at a fraction of your current cost to produce them in-house. This will lower the cost to produce the Xtreme line allowing the company to increase their margin, lower prices to customers or some combination of both. Consequently, you believe it is now time to revisit that correspondence and start putting together a plan to address the lackluster Q1 earnings report.
Questions
1. What qualitative and quantitative factors will you have to consider before recommending that the company outsource the production of the binding component of the Xtreme snow boards?
2. What accounting information will you need in order to make the best decision for the company? When identifying the accounting information needed, indicate the following:
a. Is the information you need financial or managerial in nature?
b. How will you use the accounting information in evaluating the decision?
3. Identify any potential risks associated with making this decision and how those risks can be addressed.
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