Question 1
Is there a way to estimate the cost of services and product to customers such that Stuart’s Branded Foods can be competitive in their market? Use the illustrations of the two customers to demonstrate your approach. What would be the selling price per kit or per cup for each customer?
The costing approach should be based on per Transaction Basis rather than on per kit or per pound basis because of the following reasons:
• Current costs are allocated on a per kit basis, which is not an efficient cost allocation method.
• Operational costs should be same irrespective of number of kits.
• Equipment costs should be on a per kit basis as it depends on the number of kits sold.
• Operational costs including Personnel costs,
…show more content…
What impact might it have upon the business strategy of the firm?
If Stuart Daw adopts the Transaction based Pricing Strategy it may face the following impact
On Performance:
• The price per cup for both small as well as large customers is reduced.
• It can maintain competitiveness in the large customer segment by maintaining 15% Profit Margin.
• Revenue stream generated from the customer segments may get impacted with changes in Transaction Costs and subsequently Price per Kit.
• Improved cost allocation will ensure that the company can maintain competitiveness without any appreciation in costs to customers.
On Strategy:
• The company should target to serve the large customer base with better profit margins and also choose to serve those small customers who are willing to pay the targeted price per kit.
• For difficult to serve small customers alternate and cost effective means of ordering, transporting and fulfilling the orders should be sought.
• Personnel costs, both direct and indirect should be brought under control.
• Promote bulk orders among the small customers so that effective price/cup for small customers can be brought down.
Question 3
What advice would you offer to Stuart Daw?
Our advice to Stuart Daw would be:
• Stuart Daw should adopt the new Transaction Cost allocation mechanism, which will enable it to remain competitive in the large customer segment.
The court should find that the evidence found against the defendant, Mr. Arnold J. Stewart, should not have been suppressed under the Fourth Amendment. The Fourth Amendment of the United States Constitution states that “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” The moment Stewart left his suitcase in the care of Mr. Holt, he gave him possession over it. In the case of United States v. Arango, 912 F.2d 441 (10th Cir. 1990), the court determined that the one who has the right to possession of personal property has the right to exclude others from searching it. In this situation because of Larry Holt’s growing concerns with the suitcase beginning left with him for longer than intended and the concerns of whether the suitcase contained a bomb, he did not exclude
Accordingly, to reach the scale of revenue required would mean increasing the number of transactions per month a few folds from 2,000 to 8,000 transactions. Moreover this would require not only increase in the marketing of the existing 2,000 products listed on the store, but a significant increase in the breadth of product offerings. If the number of vendors was not going to increase the current process might continue be manageable, nevertheless one of the Store’s strategies is to limit the number of products from each vendor to only 20, hence requiring an increase in the number of vendors fourfold which is relative to the increase in revenue.
This initial cost of the startup of this program will be a minimal impact on Kudler Fine Foods. The initial advertisement effort will be done via social media; the companies Facebook page and Twitter account, email and word of mouth. Allowing for a reward system for costumer referrals can be used for current and new customers as the programs is employed and continues to grow. Rajiv and bell argue “customer retention costs are generally lower than customer acquisition costs, companies are better of focusing attention on their more loyal customers especially since the top 20% of customers account for 80% of revenues and often more than 100% of profits” (p. 180, 2003). Kudler Foods could reduce their marketing expenses by using a customer loyalty system through the use of rewards. The sales increase from this program should be reflected by the increase of new customers and the increased returning customers increased spending. The use of seasonal promotions only available to costumers enrolled into the frequent buyers program could also help in increased sales profits.
With ________ as a target market strategy, the firm concentrates on serving many needs of a particular customer group.
1. With the new costing system in place, that allows the company identifying the activities that generate the most relevant costs, it will be possible to use a pricing system that takes into account the changes in demands of the clients.
Within any industry the fiscal or economic goals are to increase revenue; determine the fixed and variable costs for the business; and determine how to maximize profit. In order to reach those goals an organization needs to establish the pricing structure, product differentiation, and how to minimize the costs for the product. In this proposal will layout the strategies to reach those goals in order to make a more economic successful organization.
Companies strive to choose not only the best marketing channels, but also the best profitable channel. A profitable channel can promote and successfully sell out of a product that might not otherwise turn a profit for their producers (New Charter University 2015). “The calculations from the cost accountant for the retail segment accounts were 60 percent of sales, and for the foodservice segment accounts were 40 percent. The cost accountant believes that both channels are profitable. The accountant also believes that the company achieves an overall average gross margin of 60 percent on its sales (Bowersox, D. J., Closs, D. J., Cooper, M. B.,
• This cost method does not provide the best system for JDCW’s cost allocation. By using only three overhead rates the present system grossly undermines the true production costs since other activities of the production process are not acknowledged.
We will examine the given data from the case and compare the unit costs from the company’s current costing system (traditional costing) and from activity-based costing. We will also highlight other qualitative data in consideration with the numerical factors that may result to a significant change on our recommendation.
INTRODUCTION Businesses – from manufacturing, merchandising and service industries alike – take careful consideration in the analysis of their costing systems in order to be able to set up competitive prices in the market. Misallocation of costs may lead to incorrect price estimates, continuous production of unprofitable products, and ineffective processing schedules. In this case study, we will discuss the costing methods which Zauner Ornaments have used or is currently using and, in conclusion, be able to distinguish the advantages and disadvantages of each costing method. CASE CONTEXT The case seeks to assist Zauner’s comptroller, Yu Chia-yi, in determining the best costing method for their overhead costs. In addition we also aim to
Today’s highly competitive business world forces companies to create different tactics and relatively rely on multiple pricing strategies to conduct business.
Pay 6% sales of each order as a fee. It makes the distributors margin became lower. So the Arrow Electronics then had to increase the price of the products to keep the balance. If they do so, might lose some market share.
Under the new cost system, two broad sources of costs were identified: manufacturing and SM&A. All costs within these categories were reclassified as either volume driven or order driven. Hence, four cost pools were set up.
Using ABC for short-run decisions may sometimes prove costly in the long run. In a competitive environment (when other companies may be willing to meet the customers’ needs); long term profits may suffer due to elimination of small orders.
To be the best cost provider .Train and develop the team’s capabilities and competencies to make them technically prepared to implement the new strategy.