UOPeople MBA BUS 5910 Unit 4: Blaze Manufacturing Case Study

This assignment is a case study analysis of Blaze Manufacturing (BM), a small textile manufacturer facing financial difficulties due to rising costs and foreign competition. The analysis diagnoses the causes of BM's issues, highlighting the impact of minimum wage regulations, environmental expenses, and a lack of accounting knowledge. It explores potential alternatives, such as rejecting unprofitable orders, negotiating with suppliers, and adjusting employee commissions to improve profitability. The assignment also suggests actions BM can take, including seeking alternative suppliers, reducing fixed overhead costs, and optimizing machinery. Furthermore, it emphasizes the importance of management accounting in decision-making and the effects of ethical disputes and remuneration policies on company success. The case study provides insights into financial analysis and strategic planning within a competitive business environment.

Written Assignment Unit 4
MBA
UOPeople
BUS 5910 – Management Capstone
Dr Tamu Browne
29 t h Sept 2021

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Written Assignment Unit 4
Introduction
Blaze Manufacturing (BM), founded 20 years ago, is a small textile manufacturer located
in upstate New York. They do not mass produce inventory items for sale but instead, focuses on
producing goods to fill specific orders from different customers. Their products have relatively
standard layouts catering to different sizes, while customers can customize the colors and styles
of the fabrics. Due to foreign competition, many textile companies in the country are struggling
due to rising costs from wages and environmental regulations, and BM was no exception
(Causseaux, 2016).
Diagnose the cause
BM encountered issues with raising costs, largely due to minimum wage regulation
within the USA. While foreign competitors are not subjected to such regulations and are able to
pay lower wages, which resulted in strong price competition. Additionally, local firms are
subjected to environmental and safety regulations, which are incurred as additional expenses to
the local companies. Therefore, to prevent further loss of clients, BM had to maintain their
competitiveness by reducing their profit margins.
Due to lack of accounting knowledge, management were unaware of the profitability of
the new project. When the new financial controller did an analysis of the new project, it was
making a loss for each product completed. Management accounting helps provide financial
information for decision-making process. Information required includes revenue, sales,
operating expenses which includes both fixed and variable costs.

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Possible alternatives
Since both profitability and contribution margin results in net loss, and the company is
not in a position to increase the selling price, one possible alternative would be rejecting this
order and focusing on finding new customers that are more profitable. Alternatively, since this
would be a large order, they could liaise with their suppliers to reduce their direct cost for the
large volume of materials required.
Internally, as this is a large customer, BM could negotiate with Bill, to reduce his
commission of 4% to 2% to improve the contribution margin from $(1.08) to $0.46 and taking
on this order. While this move may be unfair to Bill for reducing his commissions by half, he
would still be better off as compared to BM rejecting this order. Furthermore, BM should relook
at its remuneration scheme (eg a tier scheme) to better compensate Bill and maintain its
competitiveness.
Lastly, return on asset (ROA) is used to evaluate how much net income is generated from
each dollar in asset. Wendy could calculate company's ROA for both scenarios, 1) existing ROA
without the new client, and 2) ROA with the new client. If the new ROA is higher, this would
mean that while this new client could have negative contribution margin, by taking on this
project could still increase company's overall revenue (Heisinger, 2012).
Plan of action
All management within BM should understand the findings of Wendy's work and the
importance of it. This would help all the stakeholders involved to properly address the issues
that the company face and alternatives to improve the company's financial standing. As BM is in
a business with poor profit margin, they should take actions in improving it. First, they could

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seek for alternative suppliers or negotiating with existing suppliers for more competitive price.
Next, they could seek alternatives in reducing fixed overhead costs, like renting out unused
spaces within the factory. Lastly, they should repair or upgrade existing quilting machine to
reduce any manual intervention by Bob. Lastly, as both Joe and Bill are remunerated based on
sales, they would naturally disagree when Wendy suggested rejecting the order. Therefore, BM
could consider amending Joe’s annual bonus based on BM’s Net profitability instead (Jensen,
2004).
Importance of this case
This case study demonstrates how management accounting helps in decision-making
process. By allocating both fixed and variable costs of each product line, managers are able to
determine the profitability of the product and then deciding if selling price should be adjusted
before the new deal is confirmed. Additionally, it also describes the effects of ethical disputes
and how incorrect remuneration policies can lead to company failure.

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References
Causseaux, W., & Caster, B. (2016). Blaze manufacturing: An ethical analysis. Journal of
Business Case Studies, 12(1), 13-18.
Heisinger, K., & Hoyle, J. B.(2012). Accounting for managers. Saylor Foundation.
Licensed by Creative Commons by-nc-sa 3.0.
Jensen, M. C., Murphy, K. J., & Wruck, E. G. (2004). Remuneration: Where we've been,
how we got to here, what are the problems, and how to fix them.