Colin Drury, Management and Cost Accounting – Berkshire Threaded Fasteners Company

Berkshire Threaded Fasteners Company
Professor John Shank, The Amos Tuck School of Business Administration
Dartmouth College
This case is reprinted from Cases in Cost Management, Shank, J. K., 1996, South Western Publishing
Company. The case was adapted by Professor John Shank, with permission from the author from an earlier case written by J. P. Culliton, Harvard Business School. The case was originally set in the mid
1970's.
In February 2000, Brandon Cook was appointed general manager by Joe Magers, president of
Berkshire Threaded Fasteners Company. Cook age 56, had wide executive experience in manufacturing products similar to those of Berkshire. The appointment of Cook resulted from management problems arising from the death of John Magers, founder and until his death in early
1999, president of the company. Joe Magers had only four years experience with the company and in early 2000 he was 34 years old. His father had hoped to train Joe over a 10-year period, but the father's untimely death had cut this seasoning period short. The younger Magers became president after his father's death, and he had exercised full control until he hired Cook.
Joe Magers knew that he had made several poor decisions during 1999 and that the morale of the organization had suffered, apparently through lack of confidence in him. When he received the income statement for 1999 (Exhibit 1), the loss of over $70,000 during a good business year convinced him that he needed help. He attracted Cook from a competitor by offering a stock option incentive in addition to salary. The arrangement was that Cook, as general manager, would have full authority to execute any changes he desired. In addition, Cook would explain the reasons for his decisions to
Magers and thereby train him for