Case 5-1 Blue Ridge Manufacturing

1. Differentiation is Blue Ridge's main competitive strategy. Because its production is based on each customers' requests which unique products in some important way. By following mass customization, the firm's marketing and production processes are designed to handle the increased varieties.

Just-in-time is another strategy for the company. Under this strategy, the firm can save expenses such as inventory cost, and avoid the risk of changes of customers' desires. Moreover, the firm is improving its ink to maintain products' quality and increase goods value. Therefore, it can not only attract different customers but also keep its reputation.

2. Blue Ridge uses activity-based costing system after upgrading its facilities over recent years. Before using ABC, the company has no basis for identifying the profitability of customers in its three categories-large, medium and small. With the introduction of ABC, management now can determine customer profitability.

3. First, the actual cost of Selling and Administrative Expenses is needed. To get those numbers, use the data in table 3 by multiply costs with the given percentage.

Secondly, calculate the percentage of sales information by using table1.

Use the numbers of S&A expenses times the above percentages to get the costs of each group customers.

Using table 2 to calculate Cost of Goods Sold:

Income Statement:

Profit per customer:

The most profitable customers are the large sized customers with high revenue and low S&A Expenses. Medium sized customers are still profitable; however, it has less revenue. The small sized customers are the biggest group for the Blue Ridge Manufacturing; conversely, its profitability is negative 5.86. The Blue Ridge needs to increase their sales price when customer orders towels under a certain quantity. Nevertheless, small amount orders can not compensate the company's expenses.

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