Publications
Publications
- September 2009 (Revised October 2010)
- HBS Case Collection
Elkay Plumbing Products Division
By: Robert S. Kaplan
Abstract
The vice president of sales learns that the most profitable 1% of the division's customers generate 100% of profits, and that two of the division's largest customers lose 50% of profits. The division has just finished a project to install a time-driven activity-based cost system that traces costs directly to the processes used to produce, sell, and deliver a wide variety of stainless steel sinks to a diverse customer base. Given the division's high variety of products and customers (which includes wholesalers, retailers, contractors, and distributors), the VP of sales wanted a much more accurate cost system so that he could conduct difficult but fact-based negotiations with customers. The case describes the design and implementation of the new cost and profit measurement system. It documents acceptance and decisions made by managers after seeing the enormous dispersion of profits among their products and customers.
Keywords
Activity Based Costing and Management; Profit; Management Systems; Consumer Products Industry; Industrial Products Industry
Citation
Kaplan, Robert S. "Elkay Plumbing Products Division." Harvard Business School Case 110-007, September 2009. (Revised October 2010.)