Question 1
For the past 2 years, 3 companies have dominated the high protein sports bar industry holding a combined 80% of the market. Rocket Sports currently ranks second in the market. Its management is considering introducing a new Heatr line of winter protein bars utilizing a groundbreaking new protein form. Rocket Sports produces the bars in a single department and all materials are added at the beginning of the process. As corporate cost accountant you have developed the following cost of production information for the Heatr line.
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WIP Inventory:
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Units
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Costs
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January 1 (50% complete)
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2200
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Direct Materials
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$2080
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Conversion Costs
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$620
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December 31 (60% Complete)
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2000
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Direct Materials
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$1880
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Units Started during the year
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458500
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Materials added
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430990
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Conversion added
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229400
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Selling and administrative costs are $1.60 per unit. Each of Rocket Sports' main competitors is selling a protein bar. Company X sells its bar for $4.10 and Company Y sells its bar for $4.05. Rocket Sports tries to earn a profit of 20% of the unit cost.
1. What factors must Rocket Sports consider in setting their price?
2. Using the average costing method what is the cost per unit?
3. Recommend and defend a unit selling price range for the Heatr protein bars.
Respond to this... Although there are many factors to consider when launching a product to an already flooded market, a company must keep pricing one of the top priorities. When setting a price for the launch of the new protein bar, Rocket Sports must look at the following: Costs to make the product; competitor's pricing of similar products; the demand for the product; and the positioning of the product.
Many companies chose to use the process costing method when determining the cost of production. Due to technology and many companies being so automated, process costing can be broken down into two categories; Direct Materials, and Conversion Costs (direct Labor and manufacturing overhead).
Other factors that are important are the competitor's pricing. When setting the price you want to stay in the same range as the other companies selling similar products or the consumer may go with the least costly if your product is way over priced. Also, there must still be a demand for this particular product you plan to launch. Hopefully, it is bigger and better than the last, and the consumer is ready for something new. And the positioning of the product must be in range. The pricing should not be too low, or this may indicate it is a bargain brand. If the product pricing is too high, the consumer may assume it is high end and will choose the middle range priced product.
https://smallbusiness.chron.com/list-factors-consider-setting-product-price-49478.html
To figure the cost per unit using the average costing method you will take the total cost of $664,970, goods available for sale, and divide it by the total units available for sale of 462,700 and get 1.44. The average cost per unit is $1.44. You would need to add administrative costs of $1.60 make the total $3.04. 20% or 3.04 is $0.61. $3.04 plus $0.61 equals $3.65.
The price of the protein bar could range anywhere from $3.65 to $4.00 and still be under the competitor's price and in a good product position.
Question 2
Since accounting standards vary from country to country, it is important to understand the causes of these variations as well as identify similarities and differences. Conduct research to locate an article that addresses the differences in accounting standards. Prepare a brief summary of the article and make sure to include the URL of the article. Why do you feel there are so many similarities/differences? How will this impact your career?
Respond to this... On the Journal of Accountancy website, I found an article called IFRS: Beyond the Standards. Since the European Union's 2002 regulation mandating IFRS for EU public companies and the execution of the Norwalk Agreement by FASB and the International Accounting Standards Board (IASB), momentum has been building for global standards convergence (Tsakumis, Campbell, &Doupnik, 2009). This article points out that even among countries that have adopted the same version of IFRS, recent accounting research suggests that two factors-national culture and language translation-could undermine the rigorous interpretation and application of IFRS and lead to a lack of comparability across countries (Tsakumis, Campbell, &Doupnik, 2009). The objective of this article is to highlight two significant hurdles that impede the consistent interpretation and application of converged standards: the influence of national culture on the interpretation of standards and the difficulty of translating standards into other languages (Tsakumis, Campbell, &Doupnik, 2009).
Research suggests that cultural differences cause accountants in different countries to interpret and apply accounting standards differently (Tsakumis, Campbell, &Doupnik, 2009). This research reveals that two accounting values directly influenced by national culture are conservatism and secrecy, which affect the measurement and disclosure of financial information in financial reports and have the greatest potential to affect cross-border financial statement comparability (Tsakumis, Campbell, &Doupnik, 2009).
Translation of IFRS into various languages poses another threat to comparability (Tsakumis, Campbell, &Doupnik, 2009). The official working language of the IASB, and the language in which IFRS is published, is English (Tsakumis, Campbell, &Doupnik, 2009). For non-English speaking accountants to have access to IFRS, they are translated into other languages (Tsakumis, Campbell, &Doupnik, 2009). Despite the care taken by translators and the oversight provided by translation review committees, translation problems exist (Tsakumis, Campbell, &Doupnik, 2009). In some cases, words and phrases used in English-language accounting standards cannot be translated into other languages without some distortion of meaning (Tsakumis, Campbell, &Doupnik, 2009). Several research studies have shown this to be true (Tsakumis, Campbell, &Doupnik, 2009).
I agree with this article. There can be so many differences based on translation and culture. Being English is the primary language; other countries may have a hard time interpreting the information. This could impact my career based on how culture can affect the measurement and disclosure of financial information, the potential biases, recognize culture accounting tendencies, and understand how these values affect interpretations and judgments (Tsakumis, Campbell, &Doupnik, 2009).
Tsakumis, G., Campbell, D., &Doupnik, T. (2009). IFRS: Beyond the Standards. Retrieved from https://www.journalofaccountancy.com/issues/2009/feb/ifrsbeyondthestandards.html
Question 3
Competitive advantage is what sets an organization apart. A competitive edge is a necessary ingredient for an organization's long-term success and survival. Unique resources provide a company with a sustainable competitive advantage. The four characteristics of unique resources are value, rarity, ability to duplicate, and ability to exploit. Resources that have all four of those characteristics can be used to form sustainable competitive advantages.
Based on the four characteristics of a product with potential for sustainable competitive advantage and based on your conducted research; identify a company that does an effective job of utilizing these resources in the competitive marketplace. Also describe the product in relations to the four characteristics of sustainable competitive advantages.
Respond to this... Apple and Sony are two companies that have held their leadership position using innovation as a competitive advantage in the technology industry with respects to strong research and pace setting innovation as leverage. These two companies are recognized all over the world as a respected brand with a corporate reputation and superior products. With Apple's Hardware and Software the strategic element leads to iTunes and iCloud. Many people criticized Apple when they started to create their own retail stores, citing how many companies have tried and failed miserably at owning their own storefront. However in retrospect, this has been one of the most brilliant moves they have made. (Bajarin, 2011)
With all four of the characteristics in place, Apple and Sony mirror each other and are able to be unique in their development of their products, have become a valuable resource for many personal and commercial needs, and are able to exploit more than just their resources, but also their popularity. They have managed strategically from both internal and external extensions to create a sustainable competitive advantage. There are competitors that try to duplicate and substitute but are not as successful to back up their brand with as strong of a reputation as Apple or Sony. I think it will be interesting to see what direction they take in the near future based on political and economic changes. One of the most important changes strategic managers must content with is the business environment.
Bajarin, Ben (2014) Why Apple Has a Strong Competitive Advantage, retrieved from: https://techpinions.com/apples-competitive-advantage/5
Coulter, Mary (2013), Strategic Management in Action, Pearson Education, Inc., Chapter 2; page 34