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ACC202 case study 3-5




Question;3CS;The Smell of Success;The Lovely Scent Perfume Company has recently suffered record;losses. Fredrick Fragrance, the CEO, has asked four of his top executives;to recommend a strategy to put the company back on a profitable track.;Wally Workshard, the Executive Vice President, suggested that the;company drop its price by 20% and predicts that this will increase sales by;85,000 units per year.;Lester Ledger, the Chief Financial Officer, suggested that the;company repackage the product in designer bottles. This would add $4.75;per unit to the production cost and fixed production costs would be increased;by $40,000 per year. Lester predicts this would increase annual sales;volume by 32%.;Buster Bumble, the Production Manager, suggested that the company;reduce the size of the standard bottle by 10%. This would save $2.65 per;unit in variable production costs. He predicts sales volume would drop by;only 4,500 units per year.;Gaylord Goodspeak, the Marketing Manager, suggested that the;company increase its marketing budget by 66% - this would add $527,000 per year;to fixed operating expenses. In addition, he recommend raising the price;by $4.90 per unit. He predicts that the combined impact would be a 17%;increase in annual sales volume.;Case assignment expectations;Use the appended spreadsheet to evaluate each of these proposals;independently. You will need to fill in the inputs based on the numbers;above. The spreadsheet will then do the remaining calculations.;Utilize the spread sheet at this URL. Copy and past to your web browser; Scent.xls;LENGTH: 2 pages typed and double-spaced;The following items will be assessed in particular;1.;Your recommendation of the;best strategy for Mr. Fragrance.;2.;The support of your answer with;relevant numbers and arguments.;4CS;BFBS, LLC.;Denys C. began a manufacturing organzation, BFBS, LLC.;in 2003. The firm specializes in natural hair care products. Most;clients are mid-sized national and international retailers who have;highly developed in-house marketing departments.;BFBS has proved to be highly successful in the past primarily;because of the strong personal attention given to the clients by the project;managers. Since inception, BFBS has expanded;into four regional segments, North/South America, Europe, and Asia. The home office is in North;America.;However, in the current year losses have been;incurred. Each office is headed by an office manager who is responsible;for all activities in that office. The managers are paid a reasonable;salaries plus a bonus with two inputs. The first input is the net income;of the manager's office and the second is the sharing of a portion of the;overall company profits. Managers have a high level of independence to;make decisions and are held accountable for the results.;Each office is allocated a portion of the non-traceable fixed;costs of the organization that are common to all offices.;The current year's segmented operating results are shown in;this excel spreadsheet. Copy and;paste to your web browser; 4 CASE excel sheet background.xls;Case assignment expectations;Review the information from the modular background. Use the;appended spreadsheet to evaluate this organization. You will need to fill;in the inputs based on the numbers. The spreadsheet should be used;to do the calculations.;LENGTH: 2-3 pages typed and double-spaced;The following items will be assessed in particular;Note: Cost of Goods sold and Transportation Expenses are both;variable, all other costs are fixed.;1.;Discuss the advantages and;disadvantages of the format present in the excel spreadsheet Responsibility;Segmentation Analysis.;2.;Explain the allocation method;used to distribute corporate expense. Is this an effective allocation method?;Why or Why not?;3.;Construct a contribution;statement showing each segment using the information from the spreadsheet.;Include percentages in a separate column for common size analysis;purposes. Also, add a total corporation column showing percentages in a common;size analysis format.;4.;As the CFO (Chief Financial;Officer) of BFBS what suggestions would you make to Denys C. and;management to improve the performance of the organization.;5CS;Pecos Printers, Inc.;Pecos Printers, Inc. is a small manufacturing firm in Houston, Texas;that manufactures color ink jet printers for the small business market.;It has just launched the PP 7500.;A 50% markup is standard in this industry so that Pecos must;sell to distributors below $400 per printer to keep the retail price below;the industry top of $600 ($400 * 150% = $600). Paul Pecos, the founder;and CEO of Pecos Printers, wants to keep the;price to distributors as low as possible so he has carefully engineered his;manufacturing process to be as efficient as possible.;The model PP 7500 is an exceptionally desirable model with the;following features;A monthly;capacity of 10,000 copiesA print speed;of 10 copies per minute for black and white and 5 copies per minute for;color.A lifetime;capacity of 120,000 copies.The ability;to accept readily available HP ink cartridges.Lester Ledger, the Pecos Controller has developed the following;cost sheet for the model 7500;Cost Category;Cost;per Unit;Direct Materials (Variable);$145;Direct Labor (Variable);60;Overhead (Variable);40;Overhead (Fixed)*;45;Total Unit Costs;$290;*This is determined on a per unit basis as followed.;Lester assumes that the annual fixed overhead costs for this product will be;$450,000 and that approximately 10,000 Model 7500's will be produced during;the current year. Pecos has the;capacity to produce 20,000 units per year without increasing fixed costs.;Paul has determined that approximately 20% of the total;manufacturing costs are necessary for a decent profit.;Based on these data, Paul has developed the following pricing;rule for his sales staff: Accept any offer from distributors of $300 or;more and reject any offer below $300.;The sales staff is on salary with no commission paid for any;sale. The salesmen negotiate with distributors who make firm offers;which the Pecos salesmen then either accept;or reject. Last month the three salesmen reported the following offers;and results;Offer;(per unit);Number;of Units;Accepted?;Sam Smoothtalk;Offer No. 1;$310;200;Yes;Offer No. 2;$305;150;Yes;Offer No. 3;$295;300;No;Harry Hustler;Offer No. 1;$305;50;Yes;Offer No. 2;$200;250;No;Offer No. 3;$300;100;Yes;Offer No. 4;$330;75;Yes;Gary Giftofgab;Offer No. 1;$305;250;Yes;Offer No. 2;$245;400;No;Offer No. 3;$325;100;Yes;In addition, Ms. Glenda Goodperson, the office assistant manager;received an offer from a new distributor for 700 units at $290. She;felt this would be advantageous for Pecos;and accepted the offer. When Paul Pecos found out about this transaction;he was furious that Ms. Goodperson had violated his decision rule and fired;her on the spot. He then cancelled the order with the new distributor.;Overall, Paul was satisfied with the month's sales;results. His sales staff had sold 925 units which translated to an;annual rate of over 11,000 units. This was 10% above his estimate of;10,000 annual sales.;Case assignment expectations;Review the information from the modular background and the case;infomation above. Evaluate Paul Pecos' decision rule. Evaluate Paul;Pecos' reaction to Ms. Goodperson's sale.;LENGTH: 2 pages typed and double-spaced;The following items will be assessed in particular;1. Prepare a contribution margin income statement for the month;with two columns: in the first column, show the results following;Paul's decision rule. In the second column, show what the results would;have been if you chose to revise the decision rule and your revised decision;rule had been followed. For simplicity sake, ignore non-manufacturing;costs and taxes.;2. Do you have any other recommendations for Paul to improve his;operations?


Paper#44470 | Written in 18-Jul-2015

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