Topics: Cost accounting, Costs, Cost Pages: 20 (3678 words) Published: April 17, 2013
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Rev. April24,'1997

Destin Brass Products Co.
Eaery month it becomes clearer to me that our competitors either know something that g;e do not know, or they are crazy. I realize that pumps are a major product in a big market for aII of us, but with the price cutting that is going on, it is likely that no one utill be able to seII pumps profitably if they keep forcing us to match their lower prices. I Suess we should be grateful that competitors seem to be oaerlooking the opportunities for profit in flow controllers. Eaen with the 721/flo price increase we made there, our sales representatiues report no new competition.

Roland Guidry, president of Destin Brass Products, was discussing product profitability in the latest month with ?eggy Alford, his controller, and ]ohn Scott, his manufacturing manager. The meeting among the three was taking place in an atmosphere tinged with apprehension because .o*p"dtorr had been reducing prices on pumps, Destin Brass Product's major productJ.ine. With no unique design advantage, ma.,igers at Destin had seen no alternative excePt to match the reduced prices while trying to maintain volumes. Moreover, the company's profits in the latest month had slipped again to be lower than those in the prior month. The purpose of the meeting was to try to understand the competitive trends and to develop new strategies for dealing with them if new strategies were appropriate. The three managers, along with Steve Abbott, sales and marketing manager/ who could not attend because he was away/ were very concerned because they held significani shares of ownership in Destin Brass Products. Locally, they were a success story; the company had grown to be a significant business in Destin, Florida, betier known for its white sand beaches and as "the Luckiest Fishing Village in the World."

The Company
Destin Brass Products Co. was established by Abbott, Guidry, and Scott, who purchased a moribund commercial machine shop in 1984. Steve Abbott had sensed an opportunity in a conversation with the president of a large manufacturer of water purification equipment who was dissatisfied with the quality of brass valves available. John Scott was a local legend because of the high-quality brass boit fittings he had always manufactured for the fishing fleet along the Florida Cutf Coast. Roland Guidry had recently retired from the United States Air Force, where he had a long record of administrative successes. The three then selected P"ggy Alford, an accountant with manufacturing experience, to join them.

|ohn Scott was quick to analyze the nature of problems other manufacturers were having with water purification valves. The tolerances needed were small, and to maintain them required professor Witliam l. Bruns prepared this case as the basis ineffectioe handling of an administrathse situation.


class discussion rather

than to illustrate either effectitte or

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Destin Brass Products Co.

great labor skill or expensive machine controls, or both. Wiihin weeks of forming the company, Scott and his shop crew were manufacturing valves that met or exceeded the needed specifications. Abbott negotiated a contract with the purification equipment manufacturer, and revenues soon were earned.

The company had grown quickly because the demand for water purification equipment increased, and Destin Brass Products became the sole supplier of valves to its...
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