5-1 Blue Ridge Manufacturing

In: Business and Management

Submitted By sorakim
Words 1154
Pages 5
Case I: 5-1 Blue Ridge Manufacturing

1. Blue Ridge’s competitive strategy appears to be cost leadership, focusing on a narrow product type and offering for sale only in the southeastern states. Blue Ridge’s limited offering of products, only a sports towel for limited use and distribution, give it an edge in determination as there are only so many materials, designs, and processes required for this one type of product. Though Blue Ridge does focus on just the sports towel, there are still some aspect of differentiation which causes the firm’s competitive strategy to also deviate a bit towards product differentiation. Blue Ridge offers variations of its sports towels aside from its three customary sizes (regular, hand, and midrange), offering the options of a custom “special” by request, and variations in color, printing, offering custom design or logo printing with a licensing fee, as well as embroidery. In addition to Blue Ridge’s sports towel customization options, it is also considering using a new type of EPA friendly ink along with a better quality towel. Both these changes would increase the cost of sports towels, but provide for a higher end product, allowing Blue Ridge to expand its operations nationally. Blue Ridge’s competitive strategy in the future may branch more into product differentiation, but for now, Blue Ridge’s competitive strategy emphasizes cost leadership, attempting to provide its clients with the most cost effective sports towels for their needs.
2. Blue Ridge recently began using an activity based costing system. The use of activity based costing is consistent with a cost leadership strategy as ABC allows a firm to associate specific costs with specific customers, and ultimate the profitability of those underlying activities and per respective customer.

3. Large Medium Small
Towels Regular 27,250 x $1.19 =…...

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Blue Ridge

...BLUE
RIDGE
MANUFACTURING
 ACTIVITY‐BASED
COSTING
AND
CUSTOMER
PROFITABILITY
ANALYSIS
 1.
Allocate
SG&A
Costs
to
SG&A
Activities SG&A
Costs Administration Selling TOTAL Actitives
&
Costs
allocated
 Enter
P.O Commissions Shipping
Activities Invoicing Cost
to
Make
Sales
Calls Checking
Credit Samples,
Catalog
Info Special
Handling
Charges Distribution
Management Marketing
by
Customer
Type Advertising/Promotion Marketing Administrative
Office
Support Licenses,
Fees TOTAL Total
 Shipping Sales Marketing
 Other Assigned Note 












 17,000 












 37,400 










 20,400 










 56,100 









 130,900 From
Table
3 












 15,500 










 117,800 












 9,300 










 12,400 









 155,000 












 32,500 










 155,200 










 29,700 










 68,500 









 285,900 


















‐ 


















‐ 












 85,360 
















‐ 55.00% 












 6,850 











92,210 Percentage
x
Total
Cost
Of
Each
Function 10.00% 












 15,520 
















‐ 10.00% 
















‐ 











15,520 












 21,125 


















‐ 65.00% 
















‐ 
















‐ 










 10,275 











31,400 15.00% 


















‐ 


















‐ 


















‐ 


















‐ 










 13,700 











13,700 20.00% 












 46,560 
















‐ 30.00% 












 6,850......

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