Bridgeton Industries: Automotive Component & Fabrication Plant

Bridgeton Industries: Automotive Component & Fabrication Plant

1. What is the competitive environment for Bridgeton and how has Bridgeton reacted to its competitive environment?

Due to current competitive pressure from the entrance of foreign competition, oil crises, and decline of demand for diesels, he ACF plant has experienced some difficulties in the current and previous years. It deals with competition from some Bridgeton plants and various suppliers. Bridgeton is having plenty difficulty and it seems like outsourcing and reducing overhead are the constructive ways to cut down on costs.

2. What did the outside strategic analysis recommend?

It was recommend that Muffler-exhaust systems and oil pans (Class III) were designated to be outsourced to another Bridgeton location, or purchased from an outside competitor or eliminated.

3. What is the structure of Bridgeton’s cost system?

Bridgeton’s cost systems follows a structural and executional cost system to make strategic decision that have a long term effect on the firms overall costs. This cost systems accounts for issues dealing with worker’s experiences, technology and complexity.

4. Calculate the burden rate for 87/88, 88/89, 89/90. (Exhibit 2)

87/88

OH 109,890 = 4.34

DL 25,294

88/90

OH 78,157 = 5.77

DL 13,537

89/90

OH 79,393 = 5.63

DL 14,102

5. Why did the burden rate increase in 1989?

The burden rate increase in 89/90 was due to the outsourcing of the muffle/ oil pans, which led to a labor loss of 60 direct labor jobs and 30 indirect skilled jobs.

6. Are costs reported by the cost system appropriate for the strategic analysis?

The cost used for the strategic analysis were sufficient. It classified the products into three different classes. Class I were products that had costs equal or lower than the competitors manufacturing costs. Class II were products which had costs that were 5 to 15% higher than the competitors costs. Costs that were...