There is a group of educators that closely watches Wall Street Journal articles related to different disciplines (accounting, international business, technology, economics, etc.) and that put together discussion questions based on a few articles each week.  I receive these emails and from time to time there is one that pretty much sums up what I like to do with this blog and I post it verbatim here.  This is one of those times.  The BlackBerry Torch was recently released and many are calling it Research In Motion’s answer to the Apple iPhone.  See the material below that relates the Torch to some concepts we cover in class including the value chain and cost-volume-profit (breakeven) analysis.

Piece by Piece: The Suppliers Behind the New BlackBerry Torch Smartphone
by: Jennifer Velentino-Devries and Phred Dvorak
Aug 17, 2010
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com

TOPICS: Cost Accounting, Cost-Volume-Profit Analysis, Managerial Accounting

SUMMARY: The article was written based on analysis and component price estimates by research firm iSuppli after dismantling Blackberry’s new Torch smartphone. The product was assembled in Mexico from parts made by at least 7 companies headquartered in the U.S., South Korea, the U.K., Germany, Japan, and Switzerland. Questions ask students to identify manufacturing cost components, determine gross profit, and consider what manufacturing costs are not separately identified when a company buys completed components for assembly.

QUESTIONS:
1. (Introductory) What are the three components of cost for any manufactured product?

2. (Introductory) What is the total cost of the components of the new BlackBerry Torch as estimated by iSuppli?

3. (Advanced) Assuming that the cost shown in the article comprises all of the cost identified in your answer above, what is the gross profit earned on each sale of the Torch? What is the gross profit rate on this product? In your answer, define the difference between each of these amounts.

4. (Advanced) What other costs might be included in the cost of selling this product beyond the component costs shown in this article? What other costs will Research in Motion (RIM) incur in selling this product that are never included in product cost? In your answer, define the terms period cost and product cost.

5. (Introductory) View the video that is affiliated with this article. How many Torch smartphones were sold on the opening weekend for this product? What is the possible result of this sales level?

6. (Introductory) According to the related video, what is the lowest price at which this new phone is offered? Recalculate the answers you gave to question 4 above based on this selling price.

Reviewed By: Judy Beckman, University of Rhode Island