Managerial Accounting and Organizational Controls

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At $10.5 per pair the cost, the company will purchase the 10,000 bindings at $105,000. Adding this, we get $110,000 allocation for the bindings for the supplier so that making and outsourcing are the same. Dividing this by the annual number of pairs will yield $11 which is the ceiling price that Minnetonka can be charged for ski-bindings.
3. Tables 3 and 4 shows the calculation if the new sales volume rise to 12,500 and the new expense of $10,000 is allocated to equipment rental. In this situation, the company could still save if it chooses to outsource its bindings as it will not be bothered by the incremental allocation for equipment.
Usually, these suppliers are affected as outsourcing the assembly of components will mean cutting back on orders. The company should also look at the willingness of its workforce. Outsourcing may mean terminating employees which could trigger resentment in the human resource. Also, the company should ensure that the company to outsource the ski binding meets the quality requirements of Minnetonka.
A balanced scorecard is a new approach to strategic management developed by Drs. Robert Kaplan and David Norton to provide a clear description of the aspects that companies should measure to balance the financial perspective. According to them, the balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action (Balanced Scorecard Institute 1). It works by providing significant feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.