Compute percentage of costs in each of six business-function

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Reference no: EM13937054

Evaluating managers, ROI, value-chain analysis of cost structure.

User Friendly Computer is one of the largest personal computer companies in the world. The board of directors was recently (March 2008) informed that User Friendly's president, Felix Lechat, was resigning to ‘pursue other interests'. An executive search firm recommends that the board consider appointing Peter Diamond (current CEO of Computer Power) or Rachida Kamel (current CEO of Plum Computer). You collect the following financial information on Computer Power and Plum Computer for 2006 and 2007 (in millions):

	Computer Power		Plum Computer
	2006	2007	2006	2007
Total assets	€ 360.00	€ 340.00	160	€ 240.00
Revenues	€ 400.00	€ 320.00	€ 200.00	€ 350.00
Costs
R&D	36	16.8	18	43.5
Design	15	8.4	3.6	11.6
Production	102	112	82.8	98.6
Marketing	75	92.4	36	67
Distribution	27	22.4	18	23.2
Customer service	45	28	21.6	46
Total costs	300	280	180	290
Operating profit	€ 100.00	€ 40.00	€ 20.00	€ 60.00

In early 2008, a computer magazine gave Plum Computer's main product five stars (its highest rating on a five-point scale). Computer Power's main product was given three stars, down from five stars a year ago because of customer-service problems. The computer maga- zine also ran an article on new-product introductions in the personal computer industry. Plum Computer received high marks for new products in 2007. Computer Power's perform- ance was called ‘mediocre'. One ‘unnamed insider' of Computer Power commented: ‘Our new-product cupboard is empty.'

Required

1. Use the DuPont method to analyse the ROI of Computer Power and Plum Computer in 2006 and 2007. Comment on the results.

2. Calculate the percentage of costs in each of the six business-function cost categories for Computer Power and Plum Computer in 2006 and 2007. Comment on the results.

3. Rank Diamond and Kamel as potential candidates for CEO of User Friendly Computer.

Reference no: EM13937054

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