14.24 Cost reduction; value chain analysis LO1 Budget Cupboards produces kitchen and bathroom cupboards that...
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14.24 Cost reduction; value chain analysis LO1 Budget Cupboards produces kitchen and bathroom cupboards that incorporate unusual functions (such as specialty drawers for knives and kitchen tools, and kitchen appliance holders that pop up from under the countertop. Competition in this industry has recently increased. Budget's management wants to cut costs for its basic cupboard models and then cut prices. Required a. The following table lists potential areas for cost reduction. Two potential cost reductions are provided for the first area listed (design phase). For each of the remaining areas, identify two potential ways that Budget Cupboard's management could reduce costs. Potential area for cost reduction Potential cost reductions (i) (ii) Example: Design phase Work with suppliers to reduce Redesign cupboards to use direct materials costs fewer parts Manufacturing process Administration Changes in quality or functionality b. Budget Cupboards does not currently use value chain analysis. Describe several advantages of using these methods when price competition increases
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