Ath Micro Technologies Case Study Solution

ACC 312 – Fall 2015 Fundamentals of Managerial Accounting Instructor – Brian Lendecky, MPA, CPA (copyright 2015 © Brian Lendecky) Thursday, December 3, 2015 Topic – Performance Evaluation Case – ATH MicroTechnologies Case Objectives This semester, we have discussed the roles management control system mechanisms (budgeting, variance analysis, transfer pricing, ROI, EVA, RI, and the balanced scorecard) play in better aligning employee and organization goals (aka “goal congruence”). In today’s class, we will follow the trial-and-error development of controls in a technology company, ATH MicroTechnologies Inc., as it grows from its start-up phase through several phases of evolution. Objectives:- Controlling innovation and entrepreneurial activity- Measuring performance- Managing business risk- Adapting to changing market conditions Ultimately, we are looking to balance the tension between profit, growth, and control. Growth Profit Control Case Background- Scepter acquired ATH for an initial payment of $90 million to existing shareholders.- In addition, there was an “earn-out” clause whereby Scepter would pay an additional: a. $30 million if the new products currently under development were approved by the FDA b. $35 million if an independent study proved that ATH’s technology was superior to other existing technologies c. $60 million if sales growth goals were met over the next three years d. $60 million if earnings goals were met over the next three years

Unformatted text preview: Pekić Ornella, HBC6, ATH MicroTechnologies Inc., ITF SA 2A Introduction The ATH MicroTehnologies is a company founded by Dr. Charles Casper and engineer John Frost in 1997, which deals with selling new medical imaging product. Problem In 2001, ATH MicroTechnologies founders get an offer to sell company for 90 million but they were not satisfied with that offer. They were used an “earn out” clause, in which if the firm authenticate to be efficient, they will get much more money. If we saw at previous year of this company, we will see that it had huge net loss, so based on that it would be almost incredible to acquire the sales goal of 63 million for 2003. Solution Solution is based on reducing ATH MicroTechnologies cost. Because the company exist since 1997, it have a good reputation, quality market potential, they could reduce amount of money purposeful for advertising. In the other hand they can also decrease number of employees. It is very good company, but they need to invest in themselves an try to fix this problems. ...
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