Case Teaching Package
A case teaching package is available for this case. It includes strategies for case presentation, key concepts, solutions to the assignment questions in the case, and suggestions for the most effective ways to work this case into your course.

Length
This case is 4 pages in length and its case teaching package is 10 pages.

Abstract

This heavily disguised case is set in the "mature" woodstoves business in 1986. It is not based on The Vermont Castings Company. The issue is product line strategy based on product line profitability.

Linkages to Textbooks or Journal Articles/Fit Within a Course

This is a very rich case which will easily support a full class period of good discussion. On the surface, the issue is "ABC". The company proposes to drop the stoves product line for 1986 because their accounting reports show losses for stoves. Stoves represent the mature, declining-volume, low-margin product of the past, according to top management. Ovens is the high-margin, high-growth product of the future (they hope). However, ABC analysis shows just the opposite financial picture. This suggests strongly that dropping stoves is a bad idea.

There are many other issues in the case. When the context is presented as "formulate an action plan for the company," the student must go much further than just ABC and "don’t drop stoves." The seven assignment questions set up a business perspective for the case situation, looking at the recent past, the present, and the near future.

Study Questions

1. 1. What is your estimate of the 1983 income statement and balance sheet?
   2. What is your estimate of Return on Assets in 1983? (Assume a 40% tax rate.) How is the company doing in 1983? For simplicity, you may assume that individual price and cost components have not changed between 1983 and 1985.
2. Taking a closer look at cost allocation for manufacturing, selling, and shipping expenses, what is your estimate of ovens profit and stoves profit for 1985?
3. What is your estimate of the income statement for 1986 if only ovens were sold (30,000 units)?
4. Should Bridgewater drop the stoves product line?
5. How much does it cost, on average, to ship a stove within the core area? How much does it cost, on average, to ship a stove outside the core area?
6. How much does it cost, on average, to generate a sales order for stoves in the core area (order getting costs)? How much does it cost, on average, to generate a sales order for ovens outside the core area? So what?
7. What is your advice to Tim Morrissey?

The downloadable file for this case is in Microsoft® Word 7.0 for Windows®.

If you do not have Microsoft Word, you can download the free Microsoft® Word Viewer 97 right here:   For Windows 3.x   For Windows 95

©1996  South-Western College Publishing, All Rights Reserved  webmaster@swcollege.com