MBA 5010 Unit 5 assignment 1 PDF

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Running head: Demand Management Plan

Demand Management Plan Capella University MBA 5016: Operations Management for Leaders

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Demand Management Plan

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Demand Management Plan Introduction Acme Pickle Company is known for its pickles. We are under the “Florida’s Best” brand. Their production facility is located in Jacksonville, Florida. We have been under their brand for eight years. Our pickles are being sold to stores in the southeast of the United States. 8,000- 10,000 cases of pickles are being produce a month. The pickles has the capacity to produce 12,000 cases, minus the equipment or employees.

Why some production costs are variable and some are fixed? A variable cost is one that changes in total as the volume of activity changes. A cost that does not change in total as the volume of activity changes is a fixed cost (Marshall, McManus & Viele, 2017). A variable cost isn’t as consistent as a fixed cost is. Examples of variable cost is cucumbers, spices, vinegar, jars, lids, and direct labor. Examples of fixed cost is line supervisors on salary, depreciation on the factory, property taxes on the factory, and insurance on the factory.

Analyzing the benefit of recalculating the cost of pickle production To recalculate the production costs, we will use break-even analysis. Break-even analysis is define as the amount of revenue required to have neither operating profit nor operating loss (Marshall, McManus & Viele, 2017). To calculate the break-even analysis, we will used variable cost, fixed costs and selling prices per unit. Instead of calculating 9,000 units, we will calculate 2,000 units for the break-even analysis or point. The break-even analysis is calculated by dividing the fixed costs by the price of each unit minus the variable costs per unit (Marshall et al., 2017). $66,000 is the total of the variable cost and $24,000 is the total of the fixed cost at Acme Pickle Company. $7.33 per case is the variable cost. 8,989 units (9,000) is the recent break-even point. A new break-even point would be determined by checking to see if Super Deal Company is giving us a good offer. In order for Acme Pickle Company to break-even, Super Deal needs to purchase 11,060 units of pickles. For Acme Pickle Company to profit, Super Deal Company would need to purchase double the amount of pickles. Appendix A Acme Pickle Company break-even analysis =

$ 24,000 $ 10−$ 7.33

= 8,989 (9,000) Units $ 24,000 Super Deal Company break-even analysis = $ 9.50−$ 7.33

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= 11,060 Units Recalculating Acme Pickle Company’s is beneficial to the company. The first benefit of recalculating the production cost is the opportunity to partner up with Super Deal Company. The second benefit of recalculating the production cost is that the total costs can be decrease based on the cost per unit. Recalculating can reflect if our company can increase production to produce more money. Another benefit of recalculating the production cost is, Acme Pickle Company would increase customer flow. By recalculating the cost, customers would place more orders because products are cheaper.

Analyzing how financial accounting of production cost differs from managerial accounting of production cost Managerial accounting uses economic and financial information to plan and control many activities of the entity and to support the management decision-making process. Financial accounting focuses on reporting an entity’s financial position at a point in time and/or its results of operations and cash flows for a period of time (Marshall, McManus & Viele, 2017). Managerial accounting, pays attention to the cost of each section of the product. “Management accounting looks for inefficiencies within the operation and offers solutions to resolve any issues (U.S. Chamber of Commerce, 2019).” The drawback of managerial accounting is that it overlooks some variable that can affect decision-making. Another drawback would be that managerial accounting numbers doesn’t have to be accurate. Financial accounting, concentrates on profit and losses and it also understands the company’s financial statements. Measuring results involves using the historical data of financial accounting; because of the time required to perform financial accounting and auditing procedures, there is usually a time lag of weeks or months between the end of an accounting period and the issuance of financial statements (Marshall, McManus & Viele, 2017). Another drawback would be is that financial accounting is effected by regulation.

Recommending a plan of action to management regarding Super Deals’ offer We at Acme Pickle Company recommends that 11,060 units in 2,000 increments should be sold to Super Deal Company at $9.50 per unit. Not saying yes could affect future investments or relationships. This can also create a long-term partnership between Acme Pickle Company and Super Deal Company.

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References Marshall, D., McManus, W., & Viele, D. (2017). Accounting: What the numbers mean (11th ed.). New York, NY: McGraw-Hill Education. U.S. Chamber of Commerce. (2019, March 08). Streamlining Business Operations Using Management Accounting. Retrieved August 09, 2019, from https://www.uschamber.com/co/run/finance/management-accounting-streamlining-busineessoperations....