Reference no: EM132181493
Assessment - Case Study (Part 1)
Task
This case study is broken into two related assignments. Collectively, these two assignments are designed to provide you with an opportunity to apply your understanding of strategic and sustainable management accounting concepts and practices to a real life business, The a2 Milk Company (A2M).
Background
The a2 Milk Company was founded in 2000 and focuses on the production of dairy products with only the A2 protein and no A1 protein (The a2 Milk Company, 2018). The firm's liquid milk, infant formula and other products are sold throughout Australia, New Zealand, China and other Asian markets, the UK and USA (D&B Hoovers, 2018). Between 2016 and 2017, the firm's sales grew by more than 50% and the firm's market capitalisation has grown dramatically since listing on the ASX.
Question 1 - Strategic Management (Maximum report length: 2,000 words)
You have been asked to prepare a report on the future strategic positioning of The a2 Milk Company. Areas you need to address include:
1. A brief overview of the nature and history of the firm together with the firm's current strategic priorities.
2. A detailed overview of the firm and its environment using the Porter's Five Forces Model.
3. Using Porter's generic strategies, what strategy would you recommend for the firm going forward? This recommendation should be detailed and make specific reference to the firm's product lines and geographic segments.
4. Potential financial and non-financial measures the firm could use to evaluate the success of your recommended strategy. It is suggested that you provide around five measures and these measures should be clearly linked to the different components of your strategy recommendation.
Using APA referencing, this report must be supported by reference to a range of relevant academic and other research sources (4 Marks for academic writing).
Question 2 -Product Mix and Tactical Decisions
The a2 Milk Company's product lines include A2 Full Cream, A2 Light, and A2 No Fat milk varieties. The following discussion presents hypothetical information in regards to the production of these products. This information assumes that these three product lines are manufactured on the same production line.
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A2 Full Cream
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A2 Light
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A2 No Fat
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1 ltr
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2 ltr
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1 ltr
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2 ltr
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1 ltr
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2 ltr
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Selling Price
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$ 2.90
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$ 4.80
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$ 2.90
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$ 4.80
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$ 2.90
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$ 4.80
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Direct Materials
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$ 0.50
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$ 1.00
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$ 0.55
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$ 1.10
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$ 0.60
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$ 1.20
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Direct Labour
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$ 0.20
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$ 0.40
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$ 0.25
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$ 0.50
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$ 0.30
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$ 0.60
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Variable Overhead
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$ 0.30
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$ 0.60
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$ 0.35
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$ 0.70
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$ 0.40
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$ 0.80
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Fixed
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$ 0.10
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$ 0.20
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$ 0.12
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$ 0.24
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$ 0.15
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$ 0.35
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Overhead
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Machine hrs
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0.010
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0.020
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0.012
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0.024
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0.015
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0.030
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Monthly Demand
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100,000
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90,000
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75,000
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60,000
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60,000
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50,000
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Required:
1. Assuming there are infinite machine hours, which product line should be the focus of the manufacturing efforts? Why?
2. Assuming that production was constrained by machine hours, which product line should be the focus of the manufacturing efforts? Why?
3. Assume that each month 7,000 machine hours are available. How many of each product line should be produced?
4. Assume that the firm was approached by a manufacturer offering to produce the firm's A2 No Fat line. The external producer has offered a price of $1.35 for the 1 litre bottles and $2.70 for the 2 litre bottles. The freed up capacity from outsourcing production will be devoted to the production of the Full Cream and Light varieties. On financial grounds, should the proposal be accepted? Identify and discuss non-financial, social and environmental considerations that the firm should consider in the evaluation of this proposal.
Ensure that your answers for the above are discussed and supported by relevant calculations/ workings.
Question 3 - Linear Programming
The a2 Milk Company sells a range of baby, infant and toddler formula products. The following presents hypothetical information in regards to four key varieties of these formula products. The production manager would like your assistance to identify the optimal production mix. Below is an estimation of the costs to manufacture these products.
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Premium Infant
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Premium follow-on
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Premium toddler
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Premium junior
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Selling price
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$ 36.00
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$ 35.00
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$ 33.00
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$ 32.00
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Raw materials
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$ 12.00
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$ 11.00
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$ 10.00
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$ 9.00
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Direct labour
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$ 1.50
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$ 1.50
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$ 1.50
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$ 1.50
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Variable overhead
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$ 3.00
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$ 3.00
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$ 3.00
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$ 3.00
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Fixed overhead
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$ 1.00
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$ 1.00
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$ 1.00
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$ 1.00
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Each of the four products goes through the same manufacturing process. The time for each process and the hours available each month is provided in the table below.
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Can depalitisation and sanitisation
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Powder blending
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Can filling
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Can seaming, cleaning and labeling
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Packing
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Premium Infant
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0.010
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0.030
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0.010
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0.020
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0.010
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Premium follow-on
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0.010
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0.025
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0.010
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0.020
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0.010
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Premium toddler
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0.010
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0.020
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0.010
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0.020
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0.010
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Premium junior
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0.010
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0.019
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0.010
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0.020
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0.010
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Hours available per month
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1,100
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3,000
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1,100
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2,100
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1,100
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Required:
1. Using Excel Solver, formulate a linear program to determine the optimal mix of formula varieties each month which ensures that the maximum contribution margin is obtained.
2. Discuss your results and suggest possible ways in which the firm could improve their profitability in light of the Solver analysis.
Ensure that your answers for the above are discussed and supported by relevant calculations/ workings.
Rationale
This assessment task will assess the following learning outcome/s:
- be able to apply sustainability concepts in the context of accounting and business practices.
- be able to use strategic management principles and technologies in making and assessing business decisions for profit and not for profit organisations;
- be able to generate, evaluate and use quantitative and qualitative information to measure financial and non financial performance of an organisation;
- be able to generate, evaluate and use information for planning and controlling operations within an organisation;
- be able to analyse the impact of the international business environment, global competitiveness and societal and cultural expectations on management accounting in regional, national and multinational organisations; and
- be able to develop and evaluate computer spreadsheet models which aid business decision analysis.
Assessment item 3
Task
Case Study Part 2 builds on Case Study Part 1 and continues your consideration of the application of strategic and sustainable management accounting concepts and practices to The a2 Milk Company.
Question 1 - Sustainability (Maximum report length: 1,000 words)
Operating in the dairy industry, The a2 Milk Company impacts the environment in a number of different ways and there are certain initiatives that the firm can take to minimise these impacts. The firm also impacts a number of different stakeholder groups and there are a number of key social concerns that management must be cognisant of. Prepare a report which identifies and summarises the key environmental and social concerns relating to the operations of The a2 Milk Company. Your discussion should consider a range of different stakeholder groups and a number of different environmental and social issues from across the firm's value chain.
As part of your report, suggest three potential environmental and social objectives that the firm could strive to achieve. For each of these objectives, suggest at least 2 measures that the firm could use to measure their progress towards the objectives (the template below should be used to summarise your findings for this task). This table should be presented within the body of your report and your recommendations should be thoroughly discussed.
Attachment:- assessment.rar