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Posted: April 12th, 2025
Create a 9-slide presentation Product Pricing Recommendation
Title: Product Pricing Recommendation
Number of sources: 1
Paper instructions:
Create a 9-slide presentation in which you analyze cost accounting practices to make a recommendation about whether or not to accept a purchase offer at a lower price than normal.
Introduction
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.
Scenario
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 more—this 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.
Acme Pickle Company Cost Report
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
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 a presentation (including slides and notes). Prepare a presentation of at least nine slides using PowerPoint or software of your choice detailing your recommendation and the information you used to make your recommendation.
Recommendation requirements:
Presentation slides:
Create at least nine slides detailing your recommendation and the information you used to make your recommendation.
Include additional details as slide notes.
Related company standards:
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.
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.
ePortfolio
This portfolio work project demonstrates your competency in applying knowledge and skills required of an MBA learner in the workplace. Include this in your personal ePortfolio.
Competencies Measured
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.
____________________________
Presentation: Strategic Pricing Analysis for Acme Pickle Company
Slide 1: Title Slide
Strategic Pricing Analysis for Acme Pickle Company
- Prepared by: [Your Name], Account Manager
- Date: April 11, 2025
Slide Notes: This presentation evaluates a discounted purchase offer from Super Deals, analyzing production costs to provide a recommendation that aligns with Acme’s goals.
Slide 2: Overview of Super Deals’ Offer
Key Points:
- Super Deals proposes buying 2,000 cases at $9.50 per case (normal price: $20).
- Acme’s reported cost per case is $10, suggesting a loss at $9.50.
- Opportunity: Expand market reach in Wisconsin with a promotional campaign.
Slide Notes: Super Deals’ offer is significantly below the standard price, raising concerns about profitability. However, errors in cost calculations may reveal a viable path forward.
Slide 3: Understanding Production Costs
Variable vs. Fixed Costs:
- Variable Costs: Costs that change with production volume (e.g., cucumbers, spices, jars, direct labour).
- Fixed Costs: Costs that remain constant regardless of production (e.g., supervisors’ salaries, depreciation, taxes, insurance).
Example from Cost Report:
- Variable: Cucumbers ($15,000), direct labour ($30,000).
- Fixed: Depreciation ($10,000), insurance ($1,000).
Slide Notes: Distinguishing between variable and fixed costs is essential for accurate pricing. Variable costs scale with output, while fixed costs are spread across all units produced (Drury, 2018).
Slide 4: Current Cost Calculation Issues
Reported Cost:
- Total costs: $90,000 for 9,000 cases = $10 per case.
- Problem: This method assumes all costs vary with production, ignoring fixed costs.
Impact:
- Overstates the cost per case for additional production.
- Misleads decision-making for special orders like Super Deals’.
Slide Notes: The current calculation blends fixed and variable costs, which distorts the true cost of producing extra cases. A more precise approach can clarify profitability.
Slide 5: Recalculating Production Costs
Proposed Method:
- Identify variable costs per case:
- Cucumbers: $15,000 ÷ 9,000 = $1.67.
- Spices and vinegar: $11,000 ÷ 9,000 = $1.22.
- Jars and lids: $10,000 ÷ 9,000 = $1.11.
- Direct labour: $30,000 ÷ 9,000 = $3.33.
- Total variable cost per case: $7.33.
- Exclude fixed costs (e.g., depreciation, salaries) for additional units, as they are already covered.
New Cost for 2,000 Cases:
- $7.33 × 2,000 = $14,660 (well below $9.50 × 2,000 = $19,000).
Slide Notes: By focusing on variable costs, the cost of producing 2,000 additional cases is only $7.33 per case, making the $9.50 offer profitable (Horngren et al., 2020).
Slide 6: Benefits of Recalculating Costs
Advantages:
- Reveals true profitability of special orders.
- Enables competitive pricing without sacrificing margins.
- Supports strategic growth into new markets.
- Aligns with capacity to produce 12,000 cases without extra investment.
Outcome:
- Accepting the offer yields a contribution margin of $2.17 per case ($9.50 − $7.33) = $4,340 for 2,000 cases.
Slide Notes: Recalculating costs empowers Acme to seize opportunities like Super Deals’ offer, boosting revenue and brand visibility while leveraging existing capacity.
Slide 7: Financial vs. Managerial Accounting
Financial Accounting:
- Focus: External reporting (e.g., profit, loss).
- Method: Allocates all costs (fixed and variable) to products.
- Drawback: May overstate costs for decision-making.
Managerial Accounting:
- Focus: Internal decisions (e.g., pricing, production).
- Method: Separates variable and fixed costs for incremental analysis.
- Benefit: Provides clarity for short-term decisions like special orders.
Slide Notes: Financial accounting ensures compliance but can obscure profitability for specific deals. Managerial accounting offers flexibility for strategic choices (Kaplan & Atkinson, 2019).
Slide 8: Recommendation
Plan of Action:
- Accept Super Deals’ offer at $9.50 per case.
- Use managerial accounting to confirm variable costs ($7.33 per case).
- Monitor production to stay within 12,000-case capacity.
- Evaluate long-term benefits of market expansion in Wisconsin.
Rationale:
- Generates $4,340 in contribution margin.
- Enhances brand exposure through Super Deals’ promotion.
- No additional fixed costs incurred.
Slide Notes: Accepting the offer aligns with Acme’s capacity and goals, delivering immediate profit and potential for future growth (Garrison et al., 2021).
Slide 9: Conclusion and References
Summary:
- Variable costs drive pricing for special orders, not total costs.
- Recalculating reveals the Super Deals offer is profitable.
- Managerial accounting supports smarter pricing decisions.
Next Steps:
- Approve the deal and explore similar opportunities.
References:
- Drury, C. (2018). Management and Cost Accounting. 10th ed. London: Cengage Learning.
- Horngren, C. T., Datar, S. M., & Rajan, M. V. (2020). Cost Accounting: A Managerial Emphasis. 16th ed. Harlow: Pearson.
- Kaplan, R. S., & Atkinson, A. A. (2019). Advanced Management Accounting. 3rd ed. Upper Saddle River, NJ: Prentice Hall.
- Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2021). Managerial Accounting. 17th ed. New York: McGraw-Hill Education.
Slide Notes: This analysis demonstrates how cost recalculations unlock profitable opportunities, setting a standard for future pricing decisions.
References
- Drury, C. (2018). Management and Cost Accounting. 10th ed. London: Cengage Learning.
- Horngren, C. T., Datar, S. M., & Rajan, M. V. (2020). Cost Accounting: A Managerial Emphasis. 16th ed. Harlow: Pearson.
- Kaplan, R. S., & Atkinson, A. A. (2019). Advanced Management Accounting. 3rd ed. Upper Saddle River, NJ: Prentice Hall.
- Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2021). Managerial Accounting. 17th ed. New York: McGraw-Hill Education.
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