Family Smallgoods Pty Ltd - Case Study - Accounting and Finance Assignment Help

Assignment Task:

Task:

Part A
Family Smallgoods Pty Ltd, is a successful family-owned manufacturer of meat products located in Melbourne West. Recently, the management of Family Smallgoods noticed a rapidly downward trend in the sales of one of the company’s unique and high-volume product, Gourmet Sausages. Gourmet Sausages sells for $14.00 per 750- pack based on a cost-plus pricing system. Prices are based on cost plus a 40 percent markup. The management employed a consultant to investigate as to why the sales of Gourmet Sausages are falling. The consultant informed the management that a new competitor entered the market recently. The competitor offers a similar product for $12.50 per 750- gram pack. The consultant advised the management to reduce the price to match the price of the competitor or offer a more superior product to the competitor’s one.

The management decided to reduce the price. However, in order to reduce the price, the cost of making the Gourmet Sausages also needed to be reduced. Over a number of weeks, the management were collecting the data in order to understand the processes and whether any cost reduction can be achieved. The following table contains the information for Gourmet Sausages:

Required:
1. What is the generic strategy of Family Smallgoods Pty Ltd? Based on the generic strategy, is their approach to deal with a new competitor appropriate? Why or why not? (Limit: 100 words) 3 marks
2. What should the target cost be if the management wish to match the competitor’s price and maintain its existing markup? 2 marks
3. Calculate the total monthly cost of all activities included in Table 1: The bill of activities for Gourmet Sausages, and the cost per unit. 3 marks

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