A.1. How did the competitive environment change for the John Deere Component Works between the 1970’s and the 1980’s? What information must management accounting systems provide to
support effective decision-making in these different environments?
A.2. Diagram the existing cost system for the turning machine area and comment on its strengths and weaknesses.
A.3. What caused the existing cost system to fail in the 1980’s? What symptoms and evidence indicate cost system failure?
A.4. Diagram the proposed ABC system for the turning machine area. How were the limitations of the
existing cost system overcome by the ABC system?
A.5. Compare the cost of product A103 (See Exhibit 11) under the existing cost system and under the ABC approach.
John Deere Component Works (B)
B.1. What insights does ABC provide about the types of products to manufacture and the appropriate
production processes to use? Why did the existing system fail to provide these insights?
B.2. What actions are being stimulated by the ABC analysis?
B.3. Comment on William’s’ and Vintilla’s approach to developing, implementing, and insuring
acceptance of the ABC cost system. What can we learn about managing change from this example?
Sample Solution
