Matt Holland, president of Holland Electronics, was concerned about the end-of-the year marketing report that he had just received.

Matt Holland, president of Holland Electronics, was concerned about the end-of-the year marketing report that he had just received. According to Emily Jiminez, marketing manager, a price decrease for the coming year was again needed to maintain the company’s annual sales volume of integrated circuit boards (CBs). This would make a bad situation worse. The current selling price of $18 per unit was producing a $2-per unit profit – half the customary $4-per unit profit. Foreign competitors keep reducing their prices. To match the latest reduction would reduce the price from $18 to $14. This would put the price below the cost to produce and sell it. How could the foreign firms sell for such a low price? Determined to find out if there were problems with the company’s operation, Matt decided to hire Bunney Schmidt, a well-known consultant who specializes in methods of continuous improvement. Bunney indicated that she felt that an activity-based management system needed to be implemented. After three weeks, Bunney had identified the following activities and costs: