The Clifton Industries Case Study Essay

Words: 2602
Pages: 11

The current situation of our company
Table 1 the comparison between North American and European market | market | Competition | volume | margins | lead times | price | North American | Huge | significantly more competitive | Huge | | shorter | More price-sensitive | European | | | smaller | satisfactory | | Pressure on price |

The characteristics of its marketing
1 two major market areas: The first was to supply products of a type similar to our current electromechanical designs to North American aircraft manufacturers. The second was to design and manufacture electronic products for Europe and North America.
2 time was pressing. the lead time between contracts being signed and initial deliveries got increasingly
…show more content…
As mentioned before, technology and quick delivery time are significantly important for both North American and European markets; therefore, traditional cost system should be eliminated. Not mention it is not able to allocate overhead accurately can correctly. In the situation that price is almost the most important order-winning criterion and failure to deliver on time may result in the loss of orders, in addition, in this area where manufacturing airplane components, the quality is extremely important, a cost system which can take both financial and nonfinancial factors into account is in the great demand. Activity based costing system should be applied by Clifton to calculate the electronic product.

Firstly, the price of every kind of component should be calculated by its direct labor hour, material as well as the overhead. Step one is to find what activities are need for a kind of product. Step two is to calculate how much the activities created for producing such a product. Step three is to assign the costs to products based on individual products’ consumption and demand for each activity. Identified cost drivers can help calculate the price of products and serves as a link between activity and product. What is more, cost drivers can give managers positive or negative information on how the manufacturing processes perform and they help remain performance indicators in a stated of control; because when they are out of the acceptable limitations, it become a