CASE ANALYSIS

The Duncan T Shirt Company



The Duncan T Shirt Company

The cost adjustments which are needed to be carried out in order to ensure that the company is able to earn $2 per T-Shirt.

Assumptions:

With the help of buyer power company can negotiate with the suppliers or even new suppliers through which a lower rate can be obtained. As a result the company will be able to determine a lower rate for the production.

Tracking of the misplaced and the lost items should be reduced because they constitute major proportion of the costs of the company.

The accounts maintenance costs should be finished just like the costs of misplaced and tracking because they are also useless costs and are forming up the major proportion of the cost framework.

Alternative dyer should be obtained or the company should be looking for the supplier because these costs are most highlighted costs of the company and constitute the major costs of the manufacturing projects.

New Income statement

$

$

$

Total

Sales

6029700

3284300

6566900

15880900

Manufacturing Costs

0

Direct Material

505200

276000

494350

1275550

Direct Labor

345100

188500

366250

899850

manufacturing Overhead

207060

113100

219750

539910

Dyeing

1050000

560000

770000

2380000

Stamping

279400

188800

455400

923600

Embroidery

390000

91000

39000

520000

Total

2776760

1417400

2344750

6538910

Gross profit

3252940

1866900

4222150

9341990

Less Expenses :

0

Accounts

50000

200000

1000158

1250158

Sales Commission

25000

158800

300000

483800

Shipping

79380

498420

2661445

3239245

Sales

0

0

0

0

Tracking

255000

158962

157824

571786

Promotion

0

75213

225810

301023

Total

409380

1091395

4345237

5846012

Net Profit

2843560

775505

-123087

3495978

The advantages and disadvantages of the Differentiated Pricing are as follows.

Advantages

The company can exploit different segments and charge different prices of the same products for different consumers.

The company can enjoy higher profit margins because of the profit margins it is charging to different consumers.

The lower margin sales can be compensated by the higher margin sales. As a result the company can enjoy higher market share.

This strategy works best in different regions

Disadvantages

If the customers find out about the differentiated pricing then it could result as a backfire for the company.

The customers may start switching to other brands (Pride et al, 2013, p.385).



In order to charge differentiated pricing an analysis must be carried out in order to compare the market that what volumes can be sold when the company will be reducing the price of the company (Pride et al, 2013, p.385).

Other pricing Strategies

Psychological Pricing

Psychological pricing is charged in order to generate a positive psychological impact for the customers (Pride et al, 2013, p.385).

Dynamic Pricing

Dynamic pricing involves quick adjustment of market pricing in order to bring it at the level of competitors. The prices are regularly checked against the market and competitor prices and prices adjustments are made accordingly (Pride et al, 2013, p.385).

Value Based Pricing

The value based pricing can be charged for the T-Shirts which carry immense value to the customers despite having low or high production costs. If the customer perceived value is high then company can charge high value to the customer (Pride et al, 2013, p.385).

Direct labor rate / price variance formula:

(Actual hours worked × Actual rate) - (Actual hours worked × Standard rate)

XL (217600) - (21760 x 9.5) = 10880

L (229250) - (22925 x 9.5) = 11462.5

M (453000) - (45300 x 9.5) = 22650

Materials price usage variance = (Actual quantity used × Actual price) - (Actual quantity used × Standard price)

XL (326400) - (1088000 x 0.35) = -54400

L (360250) - ...