Cost Management & Analysis

Closing Case: CH4

BUS 650

Dana Leland

July 9, 2012

Cost Management & Analysis 2

In early 2000 the former president of Kraft Foods Mr. Eckert took over the world’s largest toy company Mattel, with the incentive to regain high profitability and loyal customer credibility once again (Bannon, L., 2001). Cost Management and Analysis would play a big part in this transformation. In order to survive and grow in today’s market; Mattel would need to incorporate a new cost management and analysis to determine how well or how poorly a planned action will turn out. As we will explore, cost benefit analysis is a comparatively simple and widely used technique for deciding whether to make a change. Mattel will now uses this technique and simply add up the value of the benefits for their new course of action and subtract the costs associated with it.

In our world of competitive markets, most businesses try to set prices according to the market price. These costs will have a final determination on whether the business is profitable or not. Most people look at cost management as simply cutting costs where ever they felt might save money. However, simply cutting costs straight across the board may have direct effects on your total profitability of your business. One great example why you would not want to cut back on customer care is because poor customer service will make your customers go elsewhere.

For a company like Mattel, cost management must be an essential feature of its business. Mattel started with a single project and before this new project was started, it anticipated the costs that should be identified and measured. For example, Mattel is overhauling its packaging. Mattel normally prints as many as 14 packages for the same product, with variations in languages and country tastes. Each package costs an average of $20,000, or up to $280,000 per

Cost Management & Analysis 3

product. Today instead of producing 14...