Learning Goal: I'm working on a marketing question and need the explanation and answer to help me learn.
Intro: This portfolio work project will help you to assess a request, complete an analysis to understand the impact on an organization, provide a recommendation, and communicate that recommendation.
Scenerio: The Acme Pickle Company has distributed pickles under the "Florida's Best" brand for eight years from its production facility in Jacksonville, Florida. It sells the pickles to stores in the southeastern United States. Acme normally produces between 8,000 and 10,000 cases of pickles a month but has the capacity to produce 12,000 cases without adding equipment or personnel.
The owner of a twenty-store supermarket chain in Wisconsin, called Super Deals, visits friends in Florida and is impressed with the quality of "Florida's Best" pickles. He approaches you, an Acme Pickle account manager, with an offer to buy 2,000 cases of pickles to use in a special promotion at his stores. He is thinking of something such as:
"Free jar of Florida's Best pickles with every purchase of forty dollars or morethis month only!"
He offers Acme a price of $9.50 per case, knowing that it is a very substantial discount from the normal selling price of $20 a case. Acme's management is inclined to turn the offer down, because their cost is calculated at $10.00 a case. They believe they would lose money if they sold at $9.50 a case. You, on the other hand, believe that some errors have been made in the cost accounting.
Your role: You are the account manager for Acme Pickles.
Requirements:Your analysis for the Controller and Sales Manager is needed to suggest a different way of calculating the pricing of the pickles that may be lower. As part of your analysis, address the following items:
Explain why some production costs are variable and some are fixed.
Analyze the benefit of recalculating the cost of pickle production.
How would you recalculate it?
What would the result be?
What is the benefit to the company of recalculating the cost?
Analyze how financial accounting of production cost differs from managerial accounting of production cost.
Explain the difference between the two accounting methods.
Identify the benefits and drawbacks of each method.
Recommend a plan of action to management regarding Super Deals offer.
Below is the cost report for a recent month. In this month, Acme produced 9,000 cases and sold them at $20 per case, which is Acme's normal selling price. Nine thousand cases are well beyond Acme's break-even point, enabling Acme to record a substantial profit at the nine-thousand-case level.
Item
Cost
Cucumbers
$15,000
Spices and vinegar
11,000
Jars and lids
10,000
Direct labor, paid by the case
30,000
Line supervisors, on salary
10,000
Depreciation on factory
10,000
Property taxes on factory
3,000
Insurance on factory
1,000
Total Costs:
$90,000
Cost per case (9,000 cases produced) $10.00
Acme Pickle Company Cost Report
Deliverable format:
Your team lead wants to share this analysis across remote locations of the organization and is hoping you will set the standard for how analyses and decisions of this type should be presented and supported. Your team has requested either a recorded presentation (including slides and notes) or a presentation and supporting reporting that can be distributed as a model. Prepare a presentation of at least 9 slides using PowerPoint or software of your choice detailing your recommendation and the information you used to make your recommendation. You can either record the presentation or prepare a separate report supporting the presentation.
If you choose to record your presentation, you may use Capella-supported Kaltura Media or another technology of your choice that produces a shareable URL. Kaltura is recording software that can be used to create webcam, screen, and audio recordings. Refer to the MBA Program Resources for the Using Kaltura tutorial to prepare for this option. If you choose to use something other than Kaltura Media, ensure that it creates a shareable URL and can be embedded in the courseroom to ensure faculty can access your recording.
Note: If you require the use of assistive technology or alternative communication methods to participate in these activities, please contact DisabilityServices@Capella.edu to request accommodations.
Recommendation requirements:
Presentation slides:Create at least 9 slides detailing your recommendation and the information you used to make your recommendation.
Include additional details as slide notes.
Supporting information. Choose one of the following options:Record your presentation.
Create a 23 page report to support your slides.
Related company standards:
The recommendation report is a professional document and should therefore follow the corresponding MBA Academic and Professional Document Guidelines, including single-spaced paragraphs.
In addition to the presentation or report materials, include:Title (slide or page).
References (slide or page).
Appendix with supporting materials.
At least two APA-formatted references.
Evaluation: By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies through corresponding scoring guide criteria:
Competency 1: Explain how accounting concepts and practices impact financial reporting.Explain why some production costs are variable and some are fixed.
Competency 2: Apply principles of accounting to assess financial performance.Analyze how financial accounting of production cost differs from managerial accounting of production cost.
Competency 3: Analyze accounting information to support business decisions.Analyze the benefit of recalculating the cost of pickle production.
Recommend a plan of action to management.
Competency 4: Communicate financial information with multiple stakeholders.Communicate accounting information clearly.
Faculty will use the scoring guide to review your deliverable as if they were the Controller or Sales Manager. Along with reviewing the content, they will also review the way you present this content. Review the scoring guide prior to developing and submitting your assessment.
Competencies Measured: By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and scoring guide criteria:
Competency 1: Explain how accounting concepts and practices impact financial reporting.Explain why some production costs are variable and some are fixed.
Competency 2: Apply principles of accounting to assess financial performance.Analyze how financial accounting of production cost differs from managerial accounting of production cost.
Competency 3: Analyze accounting information to support business decisions.Analyze the benefit of recalculating the cost of pickle production.
Recommend a plan of action to management.
Competency 4: Communicate financial information with multiple stakeholders.Communicate accounting information clearly.
Sample Solution
Acme Pickles: Cost Recalculation and Super Deals Offer Analysis
Introduction:
This presentation analyzes the cost structure of Acme Pickles and proposes a revised pricing strategy for the Super Deals offer. We argue that a recalculated cost approach considering variable and fixed costs can lead to a profitable agreement with Super Deals.
Slide 1: Title Slide
Title:Â Acme Pickles:Â Cost Recalculation and Super Deals Offer Analysis
Your Name and Team
Date
Slide 2: Background
Briefly introduce Acme Pickles and its "Florida's Best" brand.
Highlight the current production capacity and sales territory.
Mention Super Deals' offer and the initial concerns regarding profitability.
Full Answer Section
Slide 3: Variable vs. Fixed Costs
Define variable costs (change with production volume) and fixed costs (remain constant).
Examples:
Variable: Direct labor, raw materials (cucumbers, spices, jars)
Fixed: Line supervisors' salaries, depreciation, property taxes, insurance
Explain the importance of distinguishing these costs for accurate decision-making.
Slide 4: Traditional vs. Recalculated Cost
Present the current cost per case of $10 based on the provided report.
Identify the flaw: attributing all costs (including fixed) to each case, regardless of production volume.
Propose recalculating considering only variable costs per case.
Slide 5: Recalculated Cost Analysis
Calculate the total variable cost per case:Â $15,000 + $11,000 + $10,000 + $30,000 (9,000 cases) = $66,000 / 9,000 cases = $7.33 per case.
Highlight the significant cost reduction compared to the initial $10.
Slide 6: Super Deals Offer Evaluation
Analyze the profitability of the offer at $9.50 per case:Â $9.50 - $7.33 = $2.17 profit per case.
Emphasize the potential profit even with a discounted price.
Consider additional benefits like brand exposure and market expansion.
Slide 7: Financial Accounting vs. Managerial Accounting
Briefly explain the differences:
Financial accounting focuses on historical data for external reporting.
Managerial accounting provides future-oriented information for internal decision-making.
Highlight that our recalculation aligns with managerial accounting principles for informed business decisions.
Slide 8: Recommendation
Recommend accepting the Super Deals offer with the calculated profitable margin.
Emphasize the benefits of increased sales, market expansion, and potential for future regular orders.
Slide 9: Conclusion
Briefly summarize the key points:
Recalculating costs considering variable costs provides a more accurate picture of profitability.
The Super Deals offer presents a profitable opportunity for expansion.
Accepting the offer aligns with sound managerial accounting practices.
Additional Information (Optional):
Appendix:Â Detailed cost breakdown and calculations.
Presentation recording (if chosen).
Report supporting the presentation (if chosen).
References:
Cite at least two relevant sources supporting your analysis (e.g., textbooks, academic journals).
Note:
This is a sample framework. You can adapt and expand on it based on your specific analysis and chosen presentation format.
Remember to adhere to professional presentation and reporting standards.
I hope this helps! Let me know if you have any further questions.
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