Automotive Component & Fabrication Plant
The Automotive Component & Fabrication Plant (ACF) was a major supplier of components for the domestic automotive industry, the original plant site for Bridgeton Industries. ACF was a long-term business since the early 1900s. The market of ACT’s production was growing and dominated by U.S. automobile manufacturers, ACF faced less competition pressure because most competitions from local suppliers and other Bridgeton plants. Until the 1980s, ACF experienced serious cutbacks due to increasing gasoline price, foreign competitors and scarcity which led to decreased domestic market share.
PROBLEMS AND ISSUES.
The major problem evident for ACF is falling sales because of cost competitive pressure. The issues which lead to this problem can be as following. Loss of domestic market share due to foreign competition, expensive gasoline and scarcity make ACF face intense competition of the production contract. Lacking observations about market trends result in shutting down a business, eliminating skilled trade position, writing down machinery, equipment and buildings. ACF has poor costing systems that result in no cost competitive.
To recover loss of market share, ACF should change the variables of marketing elements includes improving product quality; decreasing sell price; adding new distributions and increasing advertising expenditure. Before building new plants, ACF should first do adequate market analysis, research and observation to avoid unnecessary waste of human resources and materials (VC and FC). ACF should use activity based costing to classify cost that can be more accurate and reliable to explain profits or losses. Budgeted overhead rates should be used in allocating overhead since budgeted overhead rates has benefits to get a better control of manufacturing activities. In addition, using budgeted overhead rate might be more reasonable for production costing purposes to collect and report actual direct costs.