Kanthal Case Study: Analyzing Profitability and Strategy

This case study analyzes Kanthal, a division of the Kanthal-Hoganas group, focusing on its financial and account management strategies. It examines Kanthal's historical context, its specialization in electrical resistance heating elements, and the motivations behind developing a new system to measure customer profitability. The assignment explores the inadequacies of the previous cost system and the implementation of the Kanthal 90 accounting management system, including its components and limitations. It further analyzes specific financial data related to non-stocked products and the strategies implemented by the company's president, such as direct online order entry systems and the use of external agents. The case study highlights the importance of account management in achieving higher growth and profitability, examining how the new system aimed to address issues with low-profit customers and promote high-margin products.

Running head: KANTHAL – CASE STUDY
KANTHAL – CASE STUDY
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Author Note

1KANTHAL – CASE STUDY
Table of Contents
Introduction................................................................................................................................2
Answer to question 1: -..............................................................................................................2
Answer to Question 2: -.............................................................................................................2
Answer to Question 3: -.............................................................................................................3
Answer to Question 4: -.............................................................................................................4
Part A:-...................................................................................................................................4
Part B: -..................................................................................................................................4
Conclusion..................................................................................................................................4
Bibliography...............................................................................................................................5

2KANTHAL – CASE STUDY
Introduction
Kanthal is one of the largest division of the Kanthal – Hoganas group of Sweden.
Headquarter of the Kanthal was in Hallstahammar which is town having the area of 150 km
and population of 17000 people. The history of the company can be traced from the back 17th
century for their iron work and water power. The company was specialized in the producing
and selling the electrical resistance heating elements. This paper is prepared to analyse the
case study of the Kanthal to find the answers of the several questions mainly related to their
management system, cost system, account management system and other system related to
the profitability of the company.
Answer to question 1: -
The Kanthal’s president is attempting to develop a system to analyse production, sale
and administrative costs at the Hallstahammar facility. For these the financial manager of
Kanthal worked with a Swedish management advisory group. To establish this system in the
firm, the financial manager and the financial advisor conducted an extensive interview of
each department to understand the requirement of the each department along with the
activities performed by the support department.
The goal behind this accounting management system is that the financial manager of
the Kanthal is wanted to move away from their traditional financial accounting categories
because the manager found that most of their organisational costs could be classified as Order
related or Volume Costs.
Answer to Question 2: -
The president feel that the previous cost system was inadequate for the new strategy
because the previous cost system treated the most sales, marketing and administrative cost as
a percentage of the sales revenue. Hence, the selling price of the customers exceeded the

3KANTHAL – CASE STUDY
standard full cost of manufacturing plus the percentage mark – up for general, selling and
administration expenses appeared to be profitable, while a customer order whose selling price
was below standard manufacturing cost plus the percentage mark – up appeared unprofitable.
As the low profit customers place the high demands on technical and commercial
services and buy low margin product in small order and order non – standard products that
have to be specially produced for them. On other hands, the high profit customers buy high –
margin, standard product and does not demands for the technical or commercial services and
accurately forecast their annual demands. Hence, the low profit customers the company have
to supply the special selling discount in order to get the business, these customers then
become the hidden loss customers.
Answer to Question 3: -
The new Kanthal 90 accounting management system also include the cost of
production in the manufacturing volume costs along with the material, direct labour and
variable overhead to replenish inventory cost. The new system also assume the cost of
continually replenishing of the product is related to the volume of production. The
manufacturing order cost includes only the cost of set – up and the other activities that were
incurred when the customers place the order. The new management system calculate the
manufacturing order costs separately for each major product group. The sales order cost
consist with the selling and administration costs that could be traced to processing an
individual customer’s order. Lastly, the new accounting management system treated the S&A
costs as the sales volume costs and were allocated proportionately to the manufacturing
volume cost.

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This system took more than a year to develop and implement that is its biggest
limitation that may affect the firm. The new accounting system also faces the problems
identifying the costs that related to stocked and non – stocked orders.
Answer to Question 4: -
Part A:-
The net operating profit for non – stocked product is the SEK 2000. While, the
Margin on Volume – related Costs is 5000 and the sale value is SEK 10,000. The total
number of the order for stocked products is 1500 and non – shacked products is 500.
Part B: -
The president of the Kanthal install the direct online order entry systems in the
customer’s location to deal with the two large but unprofitability customers. He also selected
the external agents to reduce the expenses of dealing with small account.
Conclusion
This paper concludes that the president of the Kanthal is developing the new
accounting management system for removing the accounting issues faced by the company by
having the existing accounting management system.

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Bibliography
Bashir, A. (2019). Kanthal [pdf] HarvardBusinessSchool (Rev. 2001 April, 27).