Case Study: Intermediate Managerial Accounting - Titanium Operations

This case study examines Titanium's business operations, focusing on product differentiation versus cost leadership strategies. It analyzes changes in operating income, evaluating growth, price-recovery, and productivity components. The study assesses the success of Titanium's implemented strategies and explores options for its support functions, including downsizing the cafeteria operation and considering a proposal from Delicious Foods for outsourcing. A recommendation is made to outsource the cafeteria services to maximize revenue and minimize expenses, leading to a higher profit margin for Titanium Corporation. Desklib is a platform where students can find past papers and solved assignments.

Running head: INTERMEDIATE MANAGERIAL ACCOUNTING
Intermediate Managerial Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1INTERMEDIATE MANAGERIAL ACCOUNTING
Table of Contents
Part 1: Titanium operations........................................................................................................2
1. Product differentiation versus cost leadership strategy:.....................................................2
2. Change in Titanium’s operating income:...........................................................................3
3. Growth, price-recovery and productivity components of changes in operating income:. .3
4. Evaluation of the success of Titanium in implementing its strategy:................................3
Part 2: Titanium support function..............................................................................................4
5. Acceptance of the plan for downsizing the current cafeteria operation:............................4
6. Evaluation of whether Delicious Foods proposal is more advantageous to the Titanium
Corporation than the downsizing plan:..................................................................................5
7. Recommendations:.............................................................................................................5
References:.................................................................................................................................7

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Part 1: Titanium operations
1. Product differentiation versus cost leadership strategy:
Product differentiation could be defined as a marketing procedure, which showcases
the variances between products. The intention is to depict a product more attractive compared
to the other competing products (Dopson & Hayes, 2016). Effective product differentiation
helps in developing competitive advantage for the seller of the product, since the customers
view the product as superior or unique. On the other hand, cost leadership strategy implies an
organisation that minimises production costs in relation to its competitors so that lower prices
could be charged for its products compared to the other organisations operating in the same
industry. With the help of cost leadership strategy, it becomes possible to exploit production
scale, well-defined scope and other economies, using advanced technology and
manufacturing highly standardised products (Weygandt, Kimmel & Kieso, 2015). These
patterns constitute of greater customer service, simultaneous cost leadership as well as
product leadership and thus, the concept of cost leadership is deemed to be different from
price leadership.
From the provided case study, it has been identified that Titanium has evaluated two
alternatives, which include downsizing cafeteria staff and providing a minimised menu or
contracting with an external vendor. This implies the presence of cost-cutting measures
across the organisation in order to maintain competitive prices of its products.

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2. Change in Titanium’s operating income:
3. Growth, price-recovery and productivity components of changes in operating
income:

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4. Evaluation of the success of Titanium in implementing its strategy:
From the above analysis, it is evident that Titanium has been able to raise its operating
profit. This is primarily due to the improvisation in cost optimisation or productivity
(Horngren et al., 2016). Hence, it could be stated that Titanium has been successful in
implementing its strategy in the year 2016.
Part 2: Titanium support function
5. Acceptance of the plan for downsizing the current cafeteria operation:
It has been identified from the provided information that Titanium would continue
subsidising its reduced operation; however, it would not incur above 20% of the existing
subsidy. In this case, the subsidy of downsized operation is computed as 24.04%, which is

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more than 20% of the current subsidy. Therefore, Titanium would not accept the downsized
operation.
6. Evaluation of whether Delicious Foods proposal is more advantageous to the
Titanium Corporation than the downsizing plan:
As the subsidy under current or downsized operation is greater than subsidy under
outsourced operation; therefore, it is more beneficial for Titanium Corporation.

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7. Recommendations:
After considering all the provided facts and calculations conducted, outsourcing
alternative could be recommended to Titanium Corporation. This is because this alternative
would help in maximising its revenue base as well as minimising its expenses, which would
lead to rise in profit margin (Vladychyn, 2017). If Titanium decides to outsource its
operations, the cafeteria services could be obtained at lower subsidised cost in comparison to
the current or downsized operation. Therefore, the organisation needs to opt for outsourcing
alternative so that it could earn maximum profit.

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References:
Dopson, L. R., & Hayes, D. K. (2016). Managerial accounting for the hospitality industry.
Wiley Global Education.
Horngren, C. T., Datar, S. M., Rajan, M. V., Beaubien, L., & Graham, C. (2016). Cost
accounting: A managerial emphasis (7th Canadian ed.). Toronto, Canada: Pearson
Canada Inc.
Vladychyn, M. (2017). Using Managerial Accounting Tools for Analysis, Control and
Operative Regulation of the Foreign Trade Activities of Trading
Enterprises. Accounting and Finance, 72(4), 20-27.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & managerial accounting.
John Wiley & Sons.