Pricing Analysis & Supply Chain Recommendations For SWLW

Target Costs for Each Product

Sun Worship Leisure Wear is identified as the primary manufacturer of swimwear and as per the latest board meeting the members has discussed the recommendations which were presented as per the supply chain analysis and assist the organizations in achieving the  strategic goals and objectives for 2018.

The report aims to address the target costs for each product with the use of the present cost information from the given budget. The discourse of the report aims to recommends how to achieve and maintain the target profit margins. This has been addressed with the different types of the considerations taken from the supply chain opportunities to improve costs. The study also explains how the value chain analysis may assist the board in identifying the value-added and non value-added activities. The different types of the recommendations have been further included with the recommendations as per the four products which has been compared with the cost based and market-based pricing strategies. The final recommendation has recommended the final price for the individual products and whether it should be eliminated from the product mix to the board. In case the product needs to be eliminated a recommendation for substitution has been also proposed in the report (Vogel 2014). 

The analysis of the target profit margin of 20% has been successfully achieved by the company which is evident with gross margin of 23.03% ((516376/2242500) x 100). The analysis of the target costs for the individual products has been depicted with direct material used, direct labour, manufacturing, total cost available, ending inventory and total cost of goods. The total cost of goods for bikinis has been depicted as $ 746700 with a profit margin of 38% (Choudhry et al. 2015). Similarly, the total cost of goods sold for board shorts has been inferred as $ 660016 with a total profit margin of 22%. The high amount of cost has been mainly incurred in case of towels and beach bags. This consideration has been evident with total cost of sales of $ 140208 and gross loss of 63% for towels. The total cost of sales for the beach bags are seen with $ 179200 and gross loss of 56%. However, to obtain the target profit for all the products Sun Worship Leisure Wear needs to reduce the cost of goods sold for the individual products (Cucchiella, D’Adamo and Gastaldi 2015).

Sales Budget
	January Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	February	March	April	May	June	July	August	September	October	November	December	Total
Bikinis
Budgeted Sales Volume (units)	1600	1400	1300	1000	400	500	400	200	1300	1200	1200	1500	12000
Budgeted selling price	100	100	100	100	100	100	100	100	100	100	100	100	1200
Total Bikini Sales	160000	140000	130000	100000	40000	50000	40000	20000	130000	120000	120000	150000	1200000

Board Shorts	January	February	March	April	May	June	July	August	September	October	November	December	Total
Budgeted Sales Volume (units)	1200	1100	1160	1000	600	700	500	400	1160	1100	1100	1200	11220
Budgeted selling price	75	75	75	75	75	75	75	75	75	75	75	75	75
Total Board Short Sales	90000	82500	87000	75000	45000	52500	37500	30000	87000	82500	82500	90000	841500
Towels	January	February	March	April	May	June	July	August	September	October	November	December	Total
Budgeted sale volume (units)	200	180	160	120	60	40	40	40	160	180	180	200	1560
Budgeted selling price	55	55	55	55	55	55	55	55	55	55	55	55	55
Total Board Short sales	11000	9900	8800	6600	3300	2200	2200	2200	8800	9900	9900	11000	85800
Beach Bags	January	February	March	April	May	June	July	August	September	October	November	December	Total
Budgeted sales volume	400	300	260	140	80	40	40	40	260	300	300	400	2560
Budgeted selling Price	45	45	45	45	45	45	45	45	45	45	45	45	45
Total beach bag sales	18000	13500	11700	6300	3600	1800	1800	1800	11700	13500	13500	18000	115200

Cost of Sales
Bikinis
Direct Materials Used	387000
Direct labour	336000
Manufacturing Overhead	53799.5
Total cost available for sale	24787.5
Less: Ending Finished Goods	54887
Total cost of goods sold	746700
Profit Margin	38%
Board Shorts
Direct Materials Used	387710
Direct labor	237720
Manufacturing Overhead	53799.5
Total cost available for sale	24787.5
Less: Ending Finished Goods	44001
Total cost of goods sold	660016
Profit Margin	22%
Towels
Direct Materials Used	49455
Direct labour	17584
Manufacturing Overhead	53799.5
Total cost available for sale	24787.5
Less: Ending Finished Goods	5418
Total cost of goods sold	140208
Profit Margin	-63%
Beach Bags
Direct Materials Used	68370
Direct labour	43344
Manufacturing Overhead	53799.5
Total cost available for sale	24787.5
Less: Ending Finished Goods	11101
Total cost of goods sold	179200
Profit Margin	-56%

Product	Profit/Loss Target
Bikinis	38%
Board Shorts	22%
Towels	-63%
Beach Bags	-56%

Product	Sales	Total cost of goods
Bikinis	1200000	746700
Board Shorts	841500	660016
Towels	85800	140208
Beach Bags	115200	179200

 

Product	Profit/Loss Target
Bikinis	38%
Board Shorts	22%
Towels	20%
Beach Bags	20%

Product	Sales	Total cost of goods
Bikinis	1200000	746700
Board Shorts	841500	660016
Towels	85800	68640
Beach Bags	115200	92160

The main recommendations for reduce the cost as per the supply chain strategies has been seen with implementing automation process within the warehouse. This will be conducive in reducing the costs associated to supply chain. The business should also consider to streamlining the order process for making them more efficient in nature. This needs to be ensured with completing the requisitions by using different types of the applications to make order for the specific products or inventory supplies (Meena 2016). The approval of the process needs to be taken with the consent of the designated officials. Some of the other strategies to reduce the cost has been depicted with monitoring the customer demand. This is identified as one of the ways to reduce the costs associated to supply chain and looking at the client demand. There may be several changes in the pattern from month or from season to season which needs to tracked in an accurate manner with the implementation of ERP. Improved packaging will be also conducive in storing the products so that there is no costs incurred due to damaged apparels (Chu et al. 2017).  

Value Chain Analysis

The contribution of the value added and non-value added services will be conducive in reducing the wastes. The communication of the needed information needs to be revised as per the critical safety information and identification of the safety locations. Some of the other examples of the implementation of value added and non-value added activities has been seen in terms of managing excess inventory, keeping a check on over processing, keeping a check on overproduction and keeping a check on defects (Nesticò and Pipolo 2015).

Cost based Strategy

Market-Based Pricing Strategies

· The cost-based strategy needs to focus on reduce the cost of goods sold. · This need to be done by minimising the waste in the manufacturing and supply chain process and investigate the ways in which material storage and transportation costs may be reduced. · The suppliers need to negotiate on every order that they place (Grant 2016)

· The main strategy to use the pricing strategy to increase the sales is depicted with understanding the “Unique selling propositions” which drives the sales in the first place (Hassanein and Hussainey 2015). · Getting an estimate from the competitor’s strategy is often seen to be helpful in knowing the areas where the changes needs to be made in terms of the prices of the products. · The supplier negotiation is absent in this case however the innovative marketing promotions may help in increasing the sales (Legoux et al. 2014).

The needs to be no changes made to the prices of Bikinis and board shorts so they need to be sold at $ 100 and $ 75. However, the price of the towel needs to be increased to $ 112 per unit to attain a total revenue of $ 174720 and increase the gross profit to 20%. Similarly, increasing the price per unit price of beach bags to $ 87 will assist the company generating a sales revenue of 222720 and gross profit margin of 20% (Syriopoulos, Makram and Boubaker 2015).

Conclusion

The different depictions made in the report has been able to suggest on the different types of the value added and the non-value-added strategies to reduce the waste which will be a contributing factor in the overall supply chain of the company. The evaluation of the cost based and market-based pricing strategies has been further able to state on every order that they place and understanding the “Unique selling propositions” which drives the sales in the first place.

References

Choudhry, T., Hassan, S.S. and Shabi, S., 2015. Relationship between gold and stock markets during the global financial crisis: Evidence from nonlinear causality tests. International Review of Financial Analysis, 41, pp.247-256.

Chu, P.L., Vanderghem, C., MacLean, H.L. and Saville, B.A., 2017. Financial analysis and risk assessment of hydroprocessed renewable jet fuel production from camelina, carinata and used cooking oil. Applied energy, 198, pp.401-409.

Cucchiella, F., D’Adamo, I. and Gastaldi, M., 2015. Financial analysis for investment and policy decisions in the renewable energy sector. Clean Technologies and Environmental Policy, 17(4), pp.887-904.

Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Hassanein, A. and Hussainey, K., 2015. Is forward-looking financial disclosure really informative? Evidence from UK narrative statements. International Review of Financial Analysis, 41, pp.52-61.

Legoux, R., Leger, P.M., Robert, J. and Boyer, M., 2014. Confirmation biases in the financial analysis of IT investments. Journal of the Association for Information Systems, 15(1), p.33.

Meena, G.L., 2016. Financial Analysis of select banks using Camel Approach: a study with reference to Indian Banking Industry. International Journal of Research and Scientific innovation, 10.

Nesticò, A. and Pipolo, O., 2015. A protocol for sustainable building interventions: financial analysis and environmental effects. International Journal of Business Intelligence and Data Mining, 10(3), pp.199-212.

Syriopoulos, T., Makram, B. and Boubaker, A., 2015. Stock market volatility spillovers and portfolio hedging: BRICS and the financial crisis. International Review of Financial Analysis, 39, pp.7-18.

Vogel, H.L., 2014. Entertainment industry economics: A guide for financial analysis. Cambridge University Press.