1 - would dictate on our putters. But wedges are a totally...

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Comprehensive Cost Management ____________________________________________________________________________________ Adapted from Case 11-3 in Zimmerman, Accounting for Decision Making and Control, 3rd Edition (Irwin McGraw-Hill, Boston, Massachusetts, 2000), pp. 567-570. November 22, 2006 Joe Bell, president and chief executive officer of Walsh Golf, called a meeting of the executive committee of his board of directors. He is concerned about the price competition and declining sales of his golf wedge line of business. Mr. Bell summarizes the current situation by saying As you know, we set our prices to maintain a gross margin on sales of 35 percent. On some products, such as our drivers, we have been able to achieve these prices. We have been able to achieve higher prices than a target 35 percent gross margin
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Unformatted text preview: would dictate on our putters. But wedges are a totally different story. Our factory is among the most efficient in the world. I think that some foreign companies are dumping wedges in the U.S. market, driving down prices and unit sales. We've been reluctant to further cut our prices for fear of what this will do to our gross margins. Fortunately, we've been able to offset the decline in sales of wedges by significantly raising the price of our putters. We were pleasantly surprised when our customers readily accepted the price increases of our putters, and we haven't experienced much reaction from our competitors on the putter price increases....
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