Tankmaster Manufacturing Company

Tankmaster Manufacturing company. This case requires students to consider the merits of activity-based costing in an altered production environment. It also deals with behavioural and organisational culture issues.

Davina had faced considerable opposition to the changes she had suggested, with several managers being willing to accept the shortcomings of the old system because they had ‘learned to live with it’. Davina won the day largely because of her father’s support as the latter was convinced that ‘learned to live with’ was a euphemism for ‘learned to manipulate to our own advantage’.

Davina’s father has now retired so that Davina is now conscious of the need to prove herself. Accordingly, the last thing she wants at present is the upset of another major change in the costing system. However, profits are below budget and the accountant is critical of the current costing system, saying that it is hopelessly out of line with the company’s updated manufacturing methods and also with current theories on product costing. He says, ‘We are still absorbing overheads on labour-hours and we have an absurdly high overhead absorption rate of £150 per labour-hour. We are pricing ourselves out of the market on our old established products. Product costs would be more meaningful if we absorbed overheads on machine-hours.’