Read Tidal Cloud: Cost Allocation in the Cloud from Harvard Business Publishing.
2. Review the readings from Harvard Business Publishing.
3. Tidal Cloud is a start-up that has gone through a period of substantial growth and that is realizing that the performance reporting and cost system that worked well in the past no longer accurately captures the performance of the business. Almost every successful start-up will encounter this moment as it grows. The core problem: not having an accurate understanding of product profitability is impairing management’s ability to develop a long-term strategic plan and to intelligently respond to recent actions by competitors.
4. In a word doc, write a 2-3 page analysis of the case in which you discuss the following in paragraph format:
a. Describe Tidal’s different products. Focus on the differences between them. What are the profit margins for each product?
b. Discuss the existing cost system. Include a discussion of direct and indirect costs that support the three products.
c. What problems do you see with the existing cost system? How has it worked? How has it not worked?
d. What is your intuition behind creating two cost pools instead of just one?
e. What is your intuition behind using ABC (activity-based costing)?
f. Compare and contrast the three cost systems. Does changing cost systems affect the overall profitability of the company? The profitability of each product?
g. What is your strategic recommendation?
5. Make sure to include a title page, citations, and a reference page (as needed) in APA formatting.
