Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

This analysis should be conducted from a qualitative and quantitative aspect. You should identify at least two pros and two cons of starting the new

This analysis should be conducted from a qualitative and quantitative aspect. You should identify at least two pros and two cons of starting the new product line. Then you should provide a summary of the results of your analysis. You will need to compare MMLs current cost-plus pricing strategy with the proposed return on investment to determine if MML needs to consider a different pricing method for this offering.

image text in transcribed MML has received several requests from various restaurants and large convention centres in Nova Scotia for the creation of tables, buffets, and chairs that can be used in their dining facilities. John believes that this is a growing area of opportunity, because since the pandemic, people are now beginning to celebrate special occasions and events outside of the home again. John has completed some research into this aspect of the industry, and has compiled the following information: Customization Trends: There has been an increasing demand for customized furniture across various industries, including restaurant and convention centre furniture. Businesses often look for unique, tailor-made solutions that align with their branding, space, and functional requirements. Competition: The market for customized furniture of this nature is competitive, with both large furniture companies and smaller, specialized manufacturers competing for market share. Differentiation through unique designs, quality, price, and customer service becomes important for companies to stand out. Customer Experience: Companies that can offer a smooth and enjoyable experience from design consultation to delivery and installation are likely to attract and retain more customers. Key Success Factors: Companies need to focus on innovation, efficient production processes, quality products, ability to respond quickly to customer demands, and build strong relationships with clients. John believes that MML's reputation for quality, customized, and sustainable furniture, as well as being locally owned and operated, provides a major competitive advantage in the Nova Scotia market. MML has always operated on a cost-plus pricing model. Normally, John will simply charge a 100% markup on full production costs (rounded to the nearest $100 ), as that has always seemed easy, and has kept the company profitable since incorporation. However, if MML chooses to enter into this line of business, there is a significant investment required. John has decided to create three products to market to the restaurants and convention centres: 1) Customized tables: The tables normally seat four people; there are hidden inserts that can expand the table to accommodate six people. 2) Customized chairs: The chairs are specially reinforced to be durable and are wider than traditional dining table chairs. Customers may choose to swap two chairs for a bench at no additional cost. 3) Customized buffets: The buffets are longer than traditional home buffets and can accommodate additional dishware and glassware. 7 John's estimation of costs are as follows: Per Unit Costs "A two-seat Dench cosis the same to manuracture as two cnairs. John expects that MML will be able to sell 400 tables, 1,600 chairs, and 200 buffets in the first year. In order to accommodate this new offering, MML will be required to invest in new production equipment at a cost of $2,400,000. John would like to know if it is realistic to expect a 20% return on investment if he continues with his traditional cost-plus pricing method, or if another price (and pricing method) should be proposed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting For Managerial Planning Decision Making And Control

Authors: Woody Liao, Andrew Schiff, Stacy Kline

6th Edition

1516551702, 9781516551705

More Books

Students also viewed these Accounting questions