Bridgeton Industries: Automotive Component & Fabrication Plant


Subjects Covered:

Budgeting; Competition; Corporate strategy; Cost accounting; Cost allocation; Job outsourcing



Robin Cooper; Patricia J. Bost

Bridgeton Industries was experiencing reduced sales. To become more competitive it introduced a classification procedure for products based upon their productivity and other factors. Products were classified into three groups: world class, potentially world class, and non-world class. The firm outsources the non-world class products. This outsourcing causes the costs on the remaining products to increase because some costs associated with the outsourced products did not go away. These residual costs caused more products to become non-world class and hence candidates for outsourcing. The firm has entered the death spiral.


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