Juice Pty Limited Marketing - Case Study Example

Name: Lecturer: Course name: Course code: Date Table of content Executive summary Business description Marketing plan Operating plan Environmental management plan Financial plan Conclusion Business description Top juice pty limited is a sole proprietorship situated in Australia and enjoys the privileges of a sole proprietorship form of business organization. The business currently deals with production of juice products such as Mango surprise; pineapple and Mango puree to its client and majorly supply its product to a high quality restaurant. The objective of the business is to reach many suppliers both local and international client. The company currently conducts its business in-stores and some of the key personnel in the business are sale representative who visit the restaurant frequently. The staff is significant to company success since the business currently is investing heavily on marketing the business product in order to take advantage of the supernormal growth on the new product that is yet to be exploited. The business currently intends to expand its level of sales in order to meet the customer’s demand as well taking advantage of the supernormal profit of the new product. The company’s budgeted sales depict a constant flow of sales as well as profit from the anticipated sales level and hence, there will be high return from the new venture. The only limiting factor to the business proposal is capital and thus the c company is in need of funds to finance the new venture. Marketing Plan The company intends to sale its product on a 90% sales receipt basis in the first month of the sales and the remaining 10% in the preceding month following the month of sales. This approach will help the company to reduce the risk of bad debt and improves on the profitability ratio. The forecasted sales budgeted is efficient and appropriate since its flexible to customers in paying as well as efficient to the company because a high returns is depicted from the sales of the new product. In respond to market condition, the business intends to expand its outlet in order to meet the demand from clients since; the business has performed an extensive research on the supply of the product. The business in recent times as created a long-term contact with suppliers from fruits cooperatives throughout Australia so as to secure the supply of mango puree and pulp, the diversity supply has offered the business with extended ripe mango. In this case supply of product to the business is enhanced and guaranteed meaning that the revenue to the company for each quarter is assured. Operating plan The business is having a close relation with its suppliers as well as the customers and therefore the company intends to build the reputation with its partners as well as the client in order to ensure that its product is bought in the market. To maintain a constant supply of the product in the market, The Company intends to add an additional product in the production as well as replacing the current refrigerator with a more cost effective one in order to save on cost as well as guarantee on the quality of its product. In order to provide a constant supply of electricity to refrigerate the company’s product, Installation of new solar panels is necessary and hence the business is in the process of installing the solar panel system (Jerry J. Weygandt 2009). This will in turn lead reduction of electricity expenditure as well providing, maximum protection on the product in store. Cost reduction as well as profit maximization is the key management strategies that will adopt in order to maximize on the new product that the company currently intends to sell. The business therefore is putting measures in place in order to ensure that its operating cost is low. Environmental management plan The business is dedicated to supplying its product from different location in order to guarantee for environment safety. Providing the product from diverse places will reduce the chance of environment exploitation. The business as opted for solar power as a form of energy in order to ensure that the environment concern is well taken care off. The emission of the waste product such as water will be recycled and re-used. In this case there is no exploitation of the river and ecological concern. The manufacture’s product will store in a cool and dry place in order to guarantee for product quality. In line with product safety as well ecological matters, the business intend to ensure that the working environment is safe and secure for all workers. The business intends to enhance its safety department into a more sophisticated department that provide a standard working environment as well as the safety rules well adhered to by all worker. Employees will be awarded bonus for good performance as well as leave period. This is will help worker to develop positive mind towards working. Corporate social responsibility is one of the key guideline in which the company is dedicated to adhering in line with the integrated reporting guideline instituted by the International financial reporting standard (Larry M. Walther 2012). This therefore will make the business as one of the most desired in the market as well as the suppliers of the product since, a business with good reputation attract suppliers as well as customers? This therefore is intended to ensure that there is an increase in the sales level from the current level to the anticipated higher level. In general, the profitability ratio as well as the liquidity will be enhanced Financial plan 1).The break-even point for Mango juice Break-even point= (Fixed cost/contribution margin per unit) Contribution margin per unit= (sales-variable cost}/unit Selling price per unit=$5 Variable cost per unit=$0.1 Total fixed cost=$216,000 Contribution margin per unit= (5-0, 1) =4.9 per unit. Therefore Break-even point= (216,000/4.9) =$44,082 2) Quarterly budget for the period 1st April 2014 to 31st march 2015 2a) sale budget` sales budget for quarters Mango surprise s.p Total selling price Pineapple and Mango s.p Total selling price April-June 2014 18,000 5 90,000 14,000 4 56000 July-sept2014 12,000 5 60,000 8,000 4 32000 Oct-December 2014 35,000 5 175,000 20,000 4 80000 Jan-march 2015 40,000 5 200,000 28,000 4 112000 Total sales 105,000 5 525,000 70,000 280000 2b) Purchase Budget Purchase Budget Quarter 1 Quarter 2 Quarter 3 Quarter 4 TOTAL April-June 2014 July-sept2014 Oct-December 2014 Jan-march 2015 0% 10% 40% 50% 100% Mango juice 0 1200*1.54 14000*1.54 20,000*1.54 35,200*1.54 Total purchase cost 0 1,848 21,560 30,800 54,208 Pineapple 800*1.18 8000*1.18 14,000*1.18 22,800*1.18 Total purchase cost 0 944 9440 16,520 26,904 2c) Labor Budget Labor cost Mango Juice Pineapple Total Labor cost per little 105000*0.55 70000*0.55 Total labor cost 57,750 38,500 96,250 2d).Selling expense selling expense Mango Juice Pineapple Total Total variable selling cost 105000*0.1 70000*0.7 Total labor cost 10,500 49,000 59,500 2e).Administration fixed cost budget Administration fixed cost Budget Quarterly Annually 54,000 216,000 2f). cash budget Cash Budget Quarter 1 Quarter 2 Quarter 3 Quarter 4 Opening cash 25,000 38,463 40134 154,897 RECEIPT Cash sales 90% receipt 131,400 82,800 229,500 280,800 10% receipt 14600 9200 25500 Debtors collection 0 0 0 0 Cash available 131,400 135,863 278,834 461,197 PAYMENT Purchases 0 -2,792 -31,000 -47,320 wages and salaries -24,062.50 -24,062.50 -24,062.50 -24,062.50 selling expense -14875 -14875 -14875 -14875 Administration fixed expense -54,000 -54,000 -54,000 -54,000 closing balance 38,463 40,134 154,897 320,940 2g).Projected income statement for the year ending 31st March 2015 Projected income statement for the year ending 31st March 2015 50 $0.00 Sales 805,000 cost of sales Opening stock 184431 Add purchase 81,112 Less closing stock -47,320 -218,223 Gross profit 586,777 Less Operating expenses selling expense 59,500 labor cost 96,250 Administration expense 216,000 -371,750 Net profit 215,027 Retained earnings b/d 60,331 275,358 2h) Projected statement of financial position for the year ending 31st March 2015 Projected statement of financial position for the year ending 31st March 2015 000$ .00$ Non-current Asset Refrigeration 40,000 Laptop and mf printer 3,600 Current Assets cash at bank 320940 Inventory 47,320 Account receivable 31200 399,460 443,060 Financed by equity (150,000 share 150,000 retained earning 275,358 Long-term liability Long-term debt 35,000 460,358 Question three Relevant cost for pineapple and mango in table 2 and 3 The relevant cost is the variable cost of production in which mango has a total variable cost of ($0.65*105,000=68,250) while pineapple is ($1.25*70,000=87,500} the incremental cost will create a contribution of (5-0.65)*105,000} =456,750 unit for mango and (4-1.25)*70,000} =192,500 for pine able. Analysis of contribution margin and the incremental variable cost Incremental variable cost Contribution margin Mango juice 68,250 456,750 Pineapple 87,500 192500 From the above analysis, it can be concluded that the contribution margin is higher than the incremental variable cost implying that the investment will yield a return inform of profit to the company. Question four Weighted contribution margin per unit Weighted contribution margin= (Weight of mango+ weight of pineapple)*contribution margin Weight of mango= {456,750/ (456750+192500)} =0.7 Weight of pineapple=1-0.7=-0.3 Therefore, Weighted contribution margin=0.7*[456,750/105,000}+0.3{192,500/70,000)= Weighted contribution margin per unit= (0.7*4.35) + (0.3*2.75) =$3.87 Expected profit therefore will be, Expected profit= (total contribution-fixed cost) Expected profit = (456,750=192,500)-216,000=$433,250 The combined production mix will generate a profit of $433,250 meaning that two production mix of a new product is worthwhile for investment and therefore a return from investment will be realized. Question five Net present value for mango juice and pineapple at 7% discounting rate NPV= {discounted cash flow- Initial outlay} Cash flow for mango juice= $ 456,750 NPV (Mango juice)=456,750P.VI.F.A 7%}-68,250] NPV (Mango juice) =456,750*0.9346}-68,250] = 358,619 NPV (pineapple) = {192,500*0.9346}-87,500] =92,411 Net present value is ideal for discounting the cash flow since. The model considers the time value for money as well as considering the entire cash flow generated by the project as well as a giving a decision criterion to either accept or reject the project. The disadvantage of payback period in ascertaining the worth of a security is that, the model does not consider the time value for money as well it doesn’t use all the cash flow available in ascertaining the future value. The internal rate of retune does not provide a clear ranking of mutual events and hence the model is difficult in ascertain mutual exclusive project. Question six. A).Net present value for refrigerator and decision criteria on the best frig Refrigerator 1 Option 1 Option 2 Year Cash flow P.V.I.F.A 7% p.V P.V.I.F.A 7% 2015 280,000 O.9346 261682 280,000 261688 2016 294,000 1 256779.6 294,000 256779.6 2017 301,000 1 245706.3 301,000 245706.3 10-Jul 308,000 1 234973.2 308,000 234973.2 2019 315,000 1 224595 315,000 224595 2020 322,000 1 214548.6 Total P.v 1,223,742 Total P.v 1438285 Less Io -2,000 Less Io (-8,0000 N.p.v 1,221,742 N.p.v 1,438,285 From the cash flow analysis, It can be observed that option one of the electrician gives a highest net present value unlike option two and thus the management of the company should consider investing on refrigerator one since they will earn a net present value of $ 1,438,285.The advantage of Net present value as an investment appraisal technique is that, The model considers the time value for money as well as considering the entire cash flow generated by the project as well as a giving a decision criterion to either accept or reject the project. Conclusion From the above investment analysis and appraisal, it can observe that the new project will create a higher return from investment and thus the only limiting factor to the company is the capital constraint. It is apparent that the new product will yield a constant return and thus guaranteeing that the loan repayment will be consistent. There is no fault loan repayment based on the projected cash flow, the budgeted income statement as well as the budgeted statement of financial position. The company therefore appreciates if the loan can approve loan requirement for the new product that the company plans to introduce to the market. The corporate social responsibility is adhered to hence production of a new product will not arm the environment. The company intends to recycle the water used for production in order to ensure that river and the environment are not exploited. This in general implies that the company as adhered to corporate social responsibility as well as the integrated reporting guideline lay down by international financial reporting standard. The loan if approved can be used in a worthwhile project investment that is environment friendly as well as cost minimization implying that there Reference list Jerry J. Weygandt, ‎Paul D. Kimmel, ‎Donald E. Kieso. Managerial Accounting: Tools for Business Decision Making. 2009. Larry M. Walther, ‎Christopher J. Skousen. Budgeting and Decision Making. 2012. Read More