Bremen Electronics

Company Background
Bremen Electronics is a German company that, in 1993, started a subsidiary in the United States called Bremen Electronics USA. Members of the subsidiary’s management team include Herman Klein, President and Marlene Baer, Controller. The initial purpose of this subsidiary is to market two products that were previously marketed in Europe successfully. Bremen Electronics USA began developing a strategy to expand their operations to US markets to meet a target profit of $210,000 for 1994.
The first product was a garage door opener including a sender and receiver. This is referred to as RC1. The marketing strategy for this product included an agreement from a large motorized garage door manufacturer to take 100,000 units per year at a minimum. The president and controller agreed that 120,000 units was an appropriate annual target for RC1 units.
The second product was similar to a remote control garage door opener. This product turned on inside lights remotely when a person arrives home after dark. This was referred to as RC2. The marketing strategy for this product was primarily mail order catalogs. Klein and Baer agreed that this marketing method should reach the goal of 60,000 RC2 units for 1994.
In planning for 1994, Marlene Baer, Controller, began developing a financial plan to analyze costs and create more accurate projections. Much of the initial projections were based on assumptions that need further evaluation. Direct labor verses activity-based costing is a main consideration in increasing the accuracy of costing and projections.
Meeting profit goals is important to the company’s success and necessitates careful consideration of many points. More specifically, the company must be able to identify profitability projections by product and not just as a whole. Marlene Baer has been assigned the