Bridgeton Industries Case

Topics: Supply and demand, Marketing, Cost Pages: 3 (308 words) Published: February 4, 2014
Bridgeton Case

a)What is the competitive environment Bridgeton faces? What was Bridgeton’s response?

Bridgeton is facing stiff competitive pressure due to a shrinking market demand. Bridgeton sells primarily to the big three domestic automakers and starting in 1985 the Automotive Component & Fabrication plant (ACF) started to feel the loss of domestic market share. Bridgeton’s management inaccurately anticipated a continued growth in the fuel-efficient diesel engines market in the mid-1970s. In response to the external pressures of shrinking demand, Bridgeton started outsourcing product lines by classifying them on the basis of cost competitiveness. Bridgeton also aggressively pursued cost reduction by shutting down operations for example at the ACF plant. However they did not refine their product costing system displaying failure to understand cost drivers.

b)From Exhibit 2 we have:

198819891990
Direct Labor (DL)
Fuel Tanks$4,238$4,415$4,599
Manifolds6,0276,2786,540
Doors2,7312,8442,963
Muffler/Exhausts5,76600
Oil Pans6,53200
Total DL$25,294$13,537$14,102

Therefore % Change in Direct Labor from 1988 to 1990 = (($14,102-$25,294)/($25,294)) X 100 = -44.25%

Also from Exhibit 2:

Overhead by Account Number
1000$7,806 $5,572 $5,679
15006,8245,8835,928
20003,7942,0312,115
30002,5291,3541,410
40008,8887,3607,433
500024,46020,06320,274
80005,9463,7443,744
90006,7715,9485,987
110005,0113,1503,030
1200028,07715,02715,683
140009,7848,0258,110
Total Overhead$109,890 $78,157 $79,393

% change in Overhead from 1988 to 1990-27.75%
Overhead allocation rate as a % of direct labor dollars (Total Overhead/ Total DL)434.45%577.36%563%

% Change in Overhead from 1988 to 1990 = (($79,393 - $109,890)/($109,890)) X 100 = -27.75%

Overhead Allocation Rate as a % of Direct Labor Dollars for each of the three years:

1988: ($109,890/$25294) X 100 = 434.45%
1989:...
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