Harvard Case Study

Precision Worldwide, Inc.

Managerial Accounting

Week 2, Assignment

Florida Tech University

July 14, 2010

Abstract

After reading the case study from Harvard Business school by William J. Bruns named, "Precision Worldwide, Inc." quite a bit of information about steel and plastic rings was obtained. I will be discussing the meetings that occurred; information that was gathered, and then conclude with the solution that I think will best fit their company.

Introduction

Beginning in May of 2004, the general manager of Precision Worldwide, Inc. (PWI) Hans Thorborg started to hold meetings in regards to the production of new plastic rings for their company. He called upon his sales manager Gerhard Henk, and the development engineer Bodo Eisenback to help in his decision making process. Gerhard Henk had discovered about the plastic rings and urged Thorborg to start production as soon as possible due to fierce competition in France. He also reported that France would be selling their plastic rings at the same price that PWI currently sells their plastic rings so a large profit could be made by not joining their competitors.

Things that Mr. Thorborg needs to consider in my opinion, are the fact that he can't cost affectively decide to not sell the plastic ring until all the steel rings are exhausted. Because a large inventory of the special steel was already purchased, they would immediately lose their total book value of $390,000 along with any profits that could have been incurred. Although yes, only selling to certain customers is a viable concern, often times in the business world different products are offered to different customers for various reasons.

Mr. Thorborg could also try to use his excess labor and produce more steel rings, in hopes that possibly another use can be found for this product, or at least produce the raw steel so that if another use can be found it is readily available.

CVP Analysis

Plastic...