How could Colorscope improve its operations?

Answer :

Colorscope can improve its operations by training employees, and upprinting

technology/ equipment to become faster and more efficient.ultimately become more
profitable by continuing there marketing effmore clients, changing their product
pricing on their services, and ima strategy to combat rework either not doing it at all
or charging a pany rework requested by customers . Colorscope will improve their
operations and profitability by reallocating the high skilled employees to a workplace
and implement the strategy of right man in a right place .

Looking at the five core processes, we identify Scanning, Assembly, and Output as
main avoidable cost drivers in operations due to high reworking costs. Therefore,
additional quality control should be implemented by Colorscope, Inc. at those
processes to reduce the amount of reworking costs.

We found that employees in job preparation seem to have significant idle time
(73,1% capacity utilization) whereas scanning (95,6% capacity utilization) and
assembly (90% capacity utilization) processes of Colorscope, Inc. seem to be
working close to full capacity (see Tab Total cost overview).

We see a connection between the full capacity and the many mistakes that require
rework in those areas. To tackle this issue we recommend people from job
preparation to support employees in scanning and assembly. This will reduce
pressure and thus mistakes that lead to additional rework.

Besides, we see the idle capacity of the floor space is a big cost factor (13k USD)
that needs to be solved as this cost is not allocated to any job and impacts the
profitability of Colorscope, Inc. significantly. Therefore we suggest moving to a
smaller space to increase space utilization and decrease rent costs accordingly.

The work flow started at Colorscope from receiving orders on phone calls and then
recording the specifications that might cause some data to be misinterpreted or
erroneously recorded which caused reworking on the task, so that it was fully
completed and returned to the QC Department. Since the receiving and recording of
the task was the first stage of work; hence if there was any mistake at this stage then
the entire process had to be repeated in order to rework the task. In the next stage of
the process, templates of picture were created by physically cutting and pasting the
graphs, images and text.

The scanning process was done using three laser scanners and the task was sent to
the assembly department once the scanning process was completed. The assembly
was done using the old fashioned and obsolete technology, which resulted in inferior
quality of output and increased cost. New technology should be brought in to remain
competitive in the printing industry and monitoring of work should be carried out to
suggest the improvements needed.
How could it change its pricing strategy?

Answer :

Costs of work done at each process of the given task has to be analyzed and costing
system such as activity based cost should be used while allocating the overhead
cost such as rent cost to each process. Activity/capacity responsible for incurring the
cost (cost driver) should be used to allocate the cost between each process. Since
rent expenses directly relates to floor space hence; it would be reasonable to
allocate rent on the basis of floor area occupied by each department.

Cost per task needs to be calculated as per Appendix-A based on activity based
costing, and loss-making tasks should be evaluated further. In this evaluation, cost
incurred as a result of in-house error and cost associated with idle time and space
should not be considered as these are abnormal losses. New technology should be
brought in to minimize the depreciation cost due to the use of old equipments.

This is noted as part of the job costing process that almost all the loss-making tasks
have been reworked either due to changes in customer specifications or in-house
errors; this should be evaluated that what is the policy of additional charges on
rework requested by customer and the customer should be told in advance that later
changes in work will require additional cost to be paid. Frequency of reworking tasks
should be minimized. As per the Appendix-B, 8% of the jobs were reworked during
June 1996 regarding the task preparation process and 15% in respect to rest of the
three processes

COLORSCOPE INC should ensure contingency for imitation by competition, as well

as be prepared for competing payers to imitate its cost-effectiveness strategy to
decrease and control their costs, and increase the overall share of the pie for their
products as well. It is therefore important that COLORSCOPE INC does not only
settle for one means of cost leadership but continually improves. This can be done
through several different methods:

 Engaging and applying the Japanese technique of kaizen

 High efficiency
 High limit use
 Use of dealing capacity to arrange the least costs for generation inputs
 Lean production techniques (for example JIT)
 Effective creation process
 Effective dissemination channels

 Cost differentiation and leadership strategy for COLORSCOPE INC will

be based on the nitty-gritty.
 Cost initiative endeavours towards slicing expenses to a base to give
clients lower costs and in this manner will help the company of
COLORSCOPE INC to reserve funds.
 Cost leadership strategy requirements regularly identify with high
specialized abilities and access to capital
 The company should also resource into innovation and guarantee
economies of scale.
What accounting and control system should his company install?

Answer :

Activity based costing can be used as an accounting system for arriving at the base
price of each task done by justifying the work against cost consumed by each
process. So that each process is evaluated against its performance and cost
consumed.

Control system should be in place for proper and smooth operations at all the stages
of production processes. The work flow at the Colorscope is well standardized but it
is not documented. It should be documented and communicated at all levels of
production processes hence; there is no point in deviating from the standard
procedures. Customer specifications should also be sent to each production process
so that it is matched with the work completed at each step that will again help in
minimizing the chances of rework.

Since all the staff is cross-trained and can perform the activities of the entire process
involved without the need of any additional training hence; at every stage the task
should go through a quality control process before it is forwarded to the next level,
this will help in minimizing the chances of rework suggested by the quality control
division at the final stage.

As part of the internal control system, supervisory controls should be introduced at

all stages of processes in order to assess the performance of each individual and
processes involved in the completion of a task, and based on that supervision
corrective actions should be implemented