Introduction to the case study
The report discusses shed light upon the case study of Blaze Manufacturing Company involved in an unethical means of gaining profit from a negative contribution margin, which is under the strategic framework of IMA Statement of Ethical Professional Practice (Causseaux & Caster, 2016). The company has been dealing with textile manufacturing business in the US market, which is tough in terms of competition of the prices of production as well as its sales margin. On the other hand, it has been acknowledged that there has been a great loss of customers due to foreign competitors playing in the market. Based on this problem identification, the organization is found to have a low profit in the current year. In this regard, it could be acknowledged that Blaze only focuses on a specific section of orders that are normally received from its own customers. However, most of its staff receives salaries on the basis of commissions, as per 4% of the gross revenue that is generated from sales.
Introduction to the Subject Company or enterprise
From the brief analysis and identification of the case study, the subject company has been well identified with the enterprise having its business of the Textile manufacturing process. The business includes standard designs and layouts of preparing bedspreads in grand sizes and designs as well as double-sized curtains that are manufactured for hotels and hospitals. In addition, Blaze Manufacturing Company also works as a job store. It comprises of its own quilting machines that long process of manufacturing having large tables allowing ten bedspreads cut at one time. At the same time binding is made customized based on both hotels and hospitals (Causseaux & Caster, 2016). At the same time, it mentions that the company has its capacity to generate eighty bedspreads in a day for its clients. However, there is a shortage of staff in handling the manufacturing processes in the business. At this moment, Blaze hires only one cutter and five sewers and that is to save its labor cost for gaining more profit in the low-price competitive market.
Description of the problem situation in which the subject company
Problems found in an organization determine the facts about cost and operations in an organization (Friedrich, Griffith & Mumford, 2016). In other words, it provides authentic background details and information that is relevant to a business enterprise for enhancing performance. In this case, Blaze Manufacturing Company has been detected with have struggled with Gross profit Margin and material cost margin at a low scale that is affecting the business in terms of gaining a competitive position in the market. For example, it has been identified from the case analysis that the profitability report says the selling price of the products never covers the cost of the manufacturing cost in the business in the business, which is pathetically observed and identified by Wendy, the financial and management consultant working in Omega (Causseaux & Caster, 2016). Despite this fact that she holds a degree and knowledge and experience of her earlier accountability in the field, the managers and owners of the company are unable to listen to her suggestion, as the company is running an unethical code of practice.
According to the concept of contribution margin, it is the calculation of a firms’ revenue and its total variable cost (Khotimah, 2017). In other words, it has also been recognized as selling price per unit compared to the variable cost per unit as well in a business. With reference to the case here, it has been realized that the Company, donor considers its gross profit margin in respect of production cost, which is unethical in terms of competence and credibility, which is under IMA standards. It has been pointed out that no members in the responsible chair take serious note of its cost analysis.
Analysis of the Root Cause of the Company’s problem
Considering the above areas of problems that are identified in the Company, it tries to focus on its key issue of contribution margin. According to Viswanathan et al. (2018), and effective management of contribution margin is beneficial for an organization to contribute towards the fixed maintenance costs of a business so that a business could be run well for performance enhancement as well as productivity. As per IMA standards, Blaze Manufacturing Company has been involved in the overall business through uneven ways of earning profit without the company's identity and dignity (Imanet.org, 2020). Hence, it has been affecting the position and its popularity in terms of ethical leadership. Ethical conflicts, which are violating its workplace environment, could not be controlled by Wendy’s suggestion, as she could not take any legal action.
A. Subsequent Discussion on the adequate information of the proposed solution/recommendation
Based on the subsequent discussion on the adequate information and proposed solution, it can be acknowledged that the company lacks in a conventional way of doing business for the growth and profitability of the company (Moskovitz, 2019). On the other hand, it also needs some standard norms and leadership skills as well as the decision-making process in the governing body so that the business can be handled with care and efficiency. Hence, it needs to concentrate on the overall area of cost and managerial accounting operations through margin analysis, capital budgeting process as well as constraint analysis so that it can focus on its inventory valuation and the right product costing.
B. Observation of Research and Logic
At the end of the discussion, it has been identified that research and logic of the situation in relation to the cost-benefit analysis gives a clear idea that Blaze Manufacturing Company needs some effective resources as well as key operational metrics for measuring its daily performance results as well as its returns (Hallo et al. 2020). In this process, it can be able to meet its business scale for managing its fixed and variability cost in the significant areas of business. Therefore, it needs to emphasize on its cost of inventory operations as well as by contributing efficient manpower for enhancement of business. However, this would be applicable for its profit margin scales and maintaining ethical considerations of business accounts.
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Moskovitz, J. (2019). Choice, Traits, and Leadership: The Effect of Decision-Making Strategy on Effective Leadership Qualities (Doctoral dissertation).
Viswanathan, V., Tillmanns, S., Krafft, M., & Asselmann, D. (2018). Understanding the quality–quantity conundrum of customer referral programs: effects of contribution margin, extraversion, and opinion leadership. Journal of the Academy of Marketing Science, 46(6), 1108-1132.