Case Study Prairie Natural Body Care Co. Located in the beautiful Rocky Mountains of Alberta, Prairie...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Case Study Prairie Natural Body Care Co. Located in the beautiful Rocky Mountains of Alberta, Prairie Natural Body Care Co. (PNBC) embraces the philosophy of environmental sustainability. The natural standard is at the core of the company's value. "We truly believe that simple, fresh, and fewer ingredients are better. Keeping it simple allows us to choose each ingredient deliberately for its quality, safety, and benefits. Using organic whenever possible and working with local farmers, growers and wild foragers across Canada." (Cited from the company's website). The company ensures that all natural ingredients are organic, safe, and healthy, and local as possible, extracted through environmentally friendly processes, and keeps the ingredients to 10 or less. Three main skin care products are offered by PNBC: Body Butter, Hand Cream, and Lip Butter. The main ingredient beeswax is sourced from a local bee farm at Peace River, Alberta. The Peace River region is well-known for its vast fields of clover. With its long warm summer days and cool summer nights, it is idyllic to farm bees for honey and beeswax. During winter while the bees are hibernating, the beeswax are cleaned, rinsed off the honey, grass, and debris, before melted down and purified as a main ingredient for body care products. The following budgeted price and unit cost information is available for 2023: Body Butter Hand Cream Lip Butter 16.00 $ 12.00 $ 7.50 $ Selling price Costs: Beeswax Other natural seed/plant oil Natural flavour Labour costs Manufacturing overhead costs (Note 1) Selling and admin costs (Note 2) Total costs Profit $ Max Demand Min Demand 2.00 1.50 0.75 2.84 3.00 2.46 12.55 3.45 $ Body Butter 1.50 1.25 0.68 1.67 5,000 3,000 2.00 1.80 Note 1: Manufacturing overhead costs is allocated @ $8.00/machine hour to all three products. 40% of the manufacturing overhead costs is considered variable. Remaining are fixed costs. Note 2: 10% of the selling and admin costs are variable. The remaining are fixed. PNBC monthly machine hour capacity is limited to 1,800 hours. Monthly demand information is as follows: 8.90 3.10 $ 0.50 0.25 0.32 0.36 1.00 1.20 3.63 3.87 Hand Cream 2,000 Lip Butter 1,500 Question 1: Prepare a product mix analysis. Determine the machine hours required for each of the product. Determine the ranking of the products in order of its contribution margin per constrained resource. (11 marks) Question 2: Using the linear programming model under Solver, determine the optimal number of units of each product PNBC should make and sell each month to maximize the profit. (Include the screen shot of your LP models and results). (10 marks) Interpret the Answer Report and Sensitivity Report. What are the binding constraints? Explain why the constraints are binding or not binding. If the company can acquire more machine hours, what price would the company be willing to pay? (5 marks) Your accounting manager would like you to assist with the preparation of the sales variance analysis for the 2nd quarter of 2023. Budgeted and actual sales information for the company are as follows: Body Butter Hand Cream Lip Butter Total Market size Actual Sales Volume 9,600 3,600 4,200 17,400 180,000 Budget Sales Volume 9,300 5,100 4,500 18,900 160,000 Question 3: For the second quarter of 2023, calculate total sales-volume, sales-mix, and sales- quantity, market-share and market-size variances for PNBC. (20 marks) Question 4: Prepare a comprehensive variance analysis report to the CEO of PNBC to debrief her on the revenue performance for the second quarter. Ensure your recommendation is aligned with Questions 1 to 3. (10 marks) Question 5: The CEO of PNBC is wondering other than the variance analysis, what other information and analysis would help improve the sales and profit performance for the body care products. Utilize your knowledge on data analytics as introduced earlier in the course, provide management with at least two recommendations (internal and external analysis) that can be considered for future studies. (6 marks) In July 2023, PNBC was approached by a customer to place a one-time special order for 600 units of Hand Cream for $10/unit. The product is similar to PNBC's current product except that it requires less natural seed oil resulting in reduced cost from $1.25 to $1.00 per unit. If PNBC accepts this order, it is expected that it would not be able to fulfill 100 units of Hand Cream for its regular order in July. Question 6: Identify and calculate the relevant costs for the special order. What would be the minimum price PNBC would accept? (10 marks) What are the other factors for PNBC to consider in terms of the special order decision? Present your recommendation and explain why or why not you would recommend PNBC to accept the special order. (5 marks) To help estimate the plan utilities costs, the accounting manager has pulled the following data for 2021 2022: Month Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Machine hours 1,650 1,625 1,629 1,745 1,664 1,748 1,653 1,656 1,699 1,701 1,610 1,571 1,620 1,665 1,662 1,679 1,656 1,761 1,365 1,367 1,690 1,671 Plant utilities $ 7,164 7,051 6,864 6,963 $ $ $ A A A A A A A A LA LA LA LA LA LA LA LA LA LA LA $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6,752 6,880 6,724 6,732 6,843 6,949 6,612 6,512 6,638 6,955 7,047 6,691 6,632 7,015 6,157 6,210 6,926 6,871 Question 7: In Excel, prepare a regression analysis for the utility costs. (Copy and paste a screenshot of your regression analysis in your word document). Assess the regression analysis result using the criteria of economic plausibility, goodness of fit, and significance of the independent variable. Prepare the cost estimation formula of the utility costs for the accounting manager. (10 marks) In addition, explain why regression analysis method is chosen over high-low method, and comment on three other cost estimation methods to be considered. (5 marks) Case Study Prairie Natural Body Care Co. Located in the beautiful Rocky Mountains of Alberta, Prairie Natural Body Care Co. (PNBC) embraces the philosophy of environmental sustainability. The natural standard is at the core of the company's value. "We truly believe that simple, fresh, and fewer ingredients are better. Keeping it simple allows us to choose each ingredient deliberately for its quality, safety, and benefits. Using organic whenever possible and working with local farmers, growers and wild foragers across Canada." (Cited from the company's website). The company ensures that all natural ingredients are organic, safe, and healthy, and local as possible, extracted through environmentally friendly processes, and keeps the ingredients to 10 or less. Three main skin care products are offered by PNBC: Body Butter, Hand Cream, and Lip Butter. The main ingredient beeswax is sourced from a local bee farm at Peace River, Alberta. The Peace River region is well-known for its vast fields of clover. With its long warm summer days and cool summer nights, it is idyllic to farm bees for honey and beeswax. During winter while the bees are hibernating, the beeswax are cleaned, rinsed off the honey, grass, and debris, before melted down and purified as a main ingredient for body care products. The following budgeted price and unit cost information is available for 2023: Body Butter Hand Cream Lip Butter 16.00 $ 12.00 $ 7.50 $ Selling price Costs: Beeswax Other natural seed/plant oil Natural flavour Labour costs Manufacturing overhead costs (Note 1) Selling and admin costs (Note 2) Total costs Profit $ Max Demand Min Demand 2.00 1.50 0.75 2.84 3.00 2.46 12.55 3.45 $ Body Butter 1.50 1.25 0.68 1.67 5,000 3,000 2.00 1.80 Note 1: Manufacturing overhead costs is allocated @ $8.00/machine hour to all three products. 40% of the manufacturing overhead costs is considered variable. Remaining are fixed costs. Note 2: 10% of the selling and admin costs are variable. The remaining are fixed. PNBC monthly machine hour capacity is limited to 1,800 hours. Monthly demand information is as follows: 8.90 3.10 $ 0.50 0.25 0.32 0.36 1.00 1.20 3.63 3.87 Hand Cream 2,000 Lip Butter 1,500 Question 1: Prepare a product mix analysis. Determine the machine hours required for each of the product. Determine the ranking of the products in order of its contribution margin per constrained resource. (11 marks) Question 2: Using the linear programming model under Solver, determine the optimal number of units of each product PNBC should make and sell each month to maximize the profit. (Include the screen shot of your LP models and results). (10 marks) Interpret the Answer Report and Sensitivity Report. What are the binding constraints? Explain why the constraints are binding or not binding. If the company can acquire more machine hours, what price would the company be willing to pay? (5 marks) Your accounting manager would like you to assist with the preparation of the sales variance analysis for the 2nd quarter of 2023. Budgeted and actual sales information for the company are as follows: Body Butter Hand Cream Lip Butter Total Market size Actual Sales Volume 9,600 3,600 4,200 17,400 180,000 Budget Sales Volume 9,300 5,100 4,500 18,900 160,000 Question 3: For the second quarter of 2023, calculate total sales-volume, sales-mix, and sales- quantity, market-share and market-size variances for PNBC. (20 marks) Question 4: Prepare a comprehensive variance analysis report to the CEO of PNBC to debrief her on the revenue performance for the second quarter. Ensure your recommendation is aligned with Questions 1 to 3. (10 marks) Question 5: The CEO of PNBC is wondering other than the variance analysis, what other information and analysis would help improve the sales and profit performance for the body care products. Utilize your knowledge on data analytics as introduced earlier in the course, provide management with at least two recommendations (internal and external analysis) that can be considered for future studies. (6 marks) In July 2023, PNBC was approached by a customer to place a one-time special order for 600 units of Hand Cream for $10/unit. The product is similar to PNBC's current product except that it requires less natural seed oil resulting in reduced cost from $1.25 to $1.00 per unit. If PNBC accepts this order, it is expected that it would not be able to fulfill 100 units of Hand Cream for its regular order in July. Question 6: Identify and calculate the relevant costs for the special order. What would be the minimum price PNBC would accept? (10 marks) What are the other factors for PNBC to consider in terms of the special order decision? Present your recommendation and explain why or why not you would recommend PNBC to accept the special order. (5 marks) To help estimate the plan utilities costs, the accounting manager has pulled the following data for 2021 2022: Month Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Machine hours 1,650 1,625 1,629 1,745 1,664 1,748 1,653 1,656 1,699 1,701 1,610 1,571 1,620 1,665 1,662 1,679 1,656 1,761 1,365 1,367 1,690 1,671 Plant utilities $ 7,164 7,051 6,864 6,963 $ $ $ A A A A A A A A LA LA LA LA LA LA LA LA LA LA LA $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6,752 6,880 6,724 6,732 6,843 6,949 6,612 6,512 6,638 6,955 7,047 6,691 6,632 7,015 6,157 6,210 6,926 6,871 Question 7: In Excel, prepare a regression analysis for the utility costs. (Copy and paste a screenshot of your regression analysis in your word document). Assess the regression analysis result using the criteria of economic plausibility, goodness of fit, and significance of the independent variable. Prepare the cost estimation formula of the utility costs for the accounting manager. (10 marks) In addition, explain why regression analysis method is chosen over high-low method, and comment on three other cost estimation methods to be considered. (5 marks)
Expert Answer:
Related Book For
Operations management in the supply chain decisions and cases
ISBN: 978-0077835439
7th edition
Authors: Roger G Schroeder, M. Johnny Rungtusanatham, Susan Meyer Goldstein
Posted Date:
Students also viewed these accounting questions
-
What is difference between ABC costing and Process Costing. Give an example where each cost system is appropriate. I
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Can someone please summarize the case study below: if you know about the case IKEA Looks to Further Penetrate the U.S. Market 10 CASE Synopsis: IKEA is known around the world for its stylish,...
-
For the given values, determine the quadrant(s) in which the terminal side of the angle lies. cos = 0.5000
-
Let xy2 + 2y(x + 2)2 + 2 = 0. (a) If x changes from - 2.00 to - 2.01 and y > 0, approximately how much does y change? (b) If x changes from -2.00 to - 2.01 and y < 0, approximately how much does y...
-
from turning away patients on the basis of race? Why are no such consequences faced by patients who demand doctors, nurses, or workers of a specific race to administer their healthcare?
-
Maria Delgado and Oren Kelso are partners in a business. Statement paper, page 15 of a general journal, and a portion of the partnership's completed work sheet for the year ended December 31 of the...
-
Padre works for a trade magazine that publishes. lists of Power-Sizing Exponents (PSE) that reflect economies of scale for developing engineering estimates of various types of equipment. Padre has...
-
QUESTION 17 Which one has typically a larger value, IR or EIRP? Explain why and explain what each represents. QUESTION 2 What is meant by Link Budget, and for what purpose it is calculated? Explain...
-
Comprehensive Problem 1 - Part 1: Taxpayer information, Form 1040, Schedules 1, 2, 3 and 4, Schedule A, and Schedule B. Noah and Joan Arc's Tax Return Note: This problem is divided into three parts....
-
Each letter of the alphabet corresponds to a number in the obvious way. ABCDEFGHIJKLM 123456789 10 11 12 13 NOPQRS TUVWXYZ 14 15 16 17 18 19 20 21 22 23 24 25 26 To code a secret message, we can use...
-
A handstand over a keg where the pressure forces fluid through a pipe against gravity for consumption. Let's say you choose your favorite beer with a density of 1,091 kg/m 3 and a pressure of...
-
You have entered into an agreement for the purchase of land. The agreement specifies that you will take ownership of the land immediately. You have agreed to pay $ 5 1 , 0 0 0 today and another $ 5 1...
-
Carefully watch this most recent Listerine Commerical- YouTube URL: http://www.youtube.com/watch?v=IKUTchlRdOk Based on the information determine the following: 1) Listerine's Positioning Strategy: (...
-
Match the chart type with the appropriate scenario. 1) Showing a supply and demand curve based on price and quantity demanded 2) Showing the price of a stock each week for 52 weeks 3) A frequency...
-
You Invest $ 2 0 0 0 at a rate of 4 % APR for three months. How much interest Did you earn?
-
Take a moment now to reflect on a time when you underwent a performance review at work. Reflecting on that experience, consider the following: What was the format of the performance review? For...
-
Suppose the spot and six-month forward rates on the Norwegian krone are Kr 5.78 and Kr 5.86, respectively. The annual risk-free rate in the United States is 3.8 percent, and the annual risk-free rate...
-
What does it mean to say that a supply chain can be too lean? Give examples why this may be a problem.
-
1. What are the payback periods for the lawn-to-prairie conversion project, the dock blankets, the T-9 lighting fixtures, and the storm-water project? 2. Calculate the Net Present Value of the...
-
This case describes a conversation between Joe Melaney, the owner of the Toro distributorship in Galveston, Texas, and his son, Joe Jr. The immediate subject of the conversation is to decide on the...
-
During 2016, The Alberta Oil & Gas Company began an exploration project in Montana. The company had paid \($500,000\) for the drilling rights on a tract of 500 acres of land. The company then spent...
-
The Camelback Cement Company made the following expenditures relating to its plant and equipment: 1. Overhauled several machines at an aggregate cost of \($175,000\) to improve the efficiency of the...
-
Equipment costing \($290,000,\) with an expected scrap value of \($30,000\) and an estimated useful life of five years, was purchased on January 1, 2016. Calculate the depreciation expense for years...
Study smarter with the SolutionInn App