Drosselmeier Corporation

Paper Summary:

The paper evaluates Drosselmeier Corporation, a German manufacturing firm producing Christmas nutcrackers. The paper analyzes Drosselmeier's cost structures relative to its pricing strategy and the resulting net income. The paper examines several scenarios in depth based on constant assumptions relative to accounting rules, demand and investments.

Outline:
Abstract
Overview
Assumptions & Initial Cost Structure
First Scenario
Scenario for a Targeted 45k DM
Increased Capacity Scenario

From the Paper:

"There are several key assumptions to be made regarding Drosselmeier's costs and expenses in determining the optimum cost structure in order for the company to meet its revenue expectations. Determining the type of expenses associated with its product sales is important and understanding how they relate to its overall cost structure is important (Hawkins, 2006). There are essentially three types of expenses that Drosslemeier needs to account for: 1) those with a direct cause and effect, such as the costs of goods sold, 2) no future economic benefit which are periodic expenses such as office supplies, often classified as overhead, and 3) expenses classified as systematic an rational such as depreciation (West, 2003, pp.81-5). Based on understanding its cost structure and how expenses should be allocated, Drosselmeier can compute all of its various pricing strategies with a high degree of accuracy based on the same assumptions."

Sample of Sources Used:

• Hawkins, J. (2006). Cost Accounting: A Managerial Emphasis. Issues in Accounting Education, 21(2), 163+.
• Miller, G. J., Hildreth, W. B., & Rabin, J. (2001). Performance Based Budgeting. Boulder, CO: Westview Press.
• West, B. P. (2003). Professionalism and Accounting Rules. New York: Routledge.

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