Managerial Accounting Case – Lipton Essay Example

Summary

We at ALMS Consulting Co. have been hired to analyze the way product lines and product managers are being evaluated at the Thomas J. Lipton, Incorporated (Lipton or the Company) entity. We will review the performance metrics utilized at the corporate level of Lipton, explain the current methodology utilized to evaluate the individual product lines, and then detail the benefits and potential downfalls of the methodology proposed by Don Logan. Finally, we will provide our own recommendations and opinions as to how Lipton should evaluate product lines and product managers. Contents

• Organization Overview
• Current Performance Measurement
• Proposed Performance Measurement – Economic Profit
• Benefits of Proposed Performance Measurement
• Potential Issues with Proposed Performance Measurement
• Exhibit
• Analysis and Recommendations
• Educate Product Line Managers
• Train-the-Trainer
• Capital Charge
• Management Evaluation/Incentive System
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• Recommendations
• Conclusion

Organization Overview

The Company is a subsidiary of Unilever NV (Unilever) that offers a variety of products which are classified into three main operating divisions: Beverage, Food, and General Management. Within these divisions are numerous products, and corresponding product lines, ranging from tea to ice cream to salad dressings. Each of these products lines maintains a different marketing strategy based on their market position and growth potential. Historically, Liptons strategy has been to invest more capital into the products that are the most profitable while simply maintaining the other profitable product lines that lack growth potential. Unilevers corporate office does not manage Lipton?s daily operations, only requiring a meeting twice a year to discuss the Companys consolidated financial results and basic strategic plan. Consistent with this strategic plan, approved by Unilever, the Company has identified certain financial and operating objectives: Maintain sales growth of 10.5% annually;

Achieve