Pricing and Supply Chain Analysis for Sun Worship Leisure Wear

This report analyzes target costs for each product, provides recommendations for achieving target profit margins, identifies value-added and non-value added activities through value chain analysis, and recommends current prices for four products using cost-based and market-based pricing strategies. The report suggests implementing automation and streamlining order processes to reduce costs, monitoring customer demand, and improving packaging. The report recommends increasing prices for towels and beach bags to achieve a gross profit margin of 20%.

Running head: PRICING AND SUPPLY CHAIN ANALYSIS
Pricing and Supply Chain Analysis
Name of Student:
Name of University:
Author’s Note:

1PRICING AND SUPPLY CHAIN ANALYSIS
Table of Contents
Introduction......................................................................................................................................2
Analysis of the target costs for each product...................................................................................0
Providing recommendation on achieving the target........................................................................4
Contribution of value chain to identify the value added and non-value added activities................5
Providing Recommendations for the current prices of the four products compared with the cost
based and market-based pricing strategies......................................................................................5
Recommending the final price for the individual products.............................................................6
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

2PRICING AND SUPPLY CHAIN ANALYSIS
Introduction
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).

0PRICING AND SUPPLY CHAIN ANALYSIS
Analysis of the target costs for each product
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
Januar
y February March April May June July August
Septembe
r October
Novembe
r 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

1PRICING AND SUPPLY CHAIN ANALYSIS
Total
Bikini
Sales 160000 140000 130000 100000 40000
5000
0 40000 20000 130000 120000 120000 150000 1200000
Board Shorts January February March April May June July
Augus
t September October
Novembe
r 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
7500
0 45000
5250
0 37500 30000 87000 82500 82500 90000 841500
Towels January February March April May June July
Augus
t September October
Novembe
r 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
Augus
t September October
Novembe
r 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

2PRICING AND SUPPLY CHAIN ANALYSIS
Total beach
bag sales 18000 13500 11700 6300 3600 1800 1800 1800 11700 13500 13500 18000 115200

0PRICING AND SUPPLY CHAIN ANALYSIS
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%

1PRICING AND SUPPLY CHAIN ANALYSIS
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%
Bikinis Board Shorts Towels Beach Bags
-80%
-60%
-40%
-20%
0%
20%
40%
60%
38%
22%
-63%
-56%
Present analysis of the target costs

2PRICING AND SUPPLY CHAIN ANALYSIS
Figure: Gross Profit Margin for the individual Products
(Source: As created by the author)
Product Sales
Total cost of
goods
Bikinis 1200000 746700
Board Shorts 841500 660016
Towels 85800 140208
Beach Bags 115200 179200
Bikinis Board Shorts Towels Beach Bags
0
200000
400000
600000
800000
1000000
1200000
1400000
1200000
841500
85800 115200
746700
660016
140208 179200
Comparison of Cost of sales vs. Sales
Sales Total cost of goods
Figure: Revenue generated from sale Vs. COGS
(Source: As created by the author)
Target Profit Margin
Product Profit/Loss Target
Bikinis 38%
Board
Shorts 22%
Towels 20%

3PRICING AND SUPPLY CHAIN ANALYSIS
Beach
Bags 20%
Bikinis Board Shorts Towels Beach Bags
0%
5%
10%
15%
20%
25%
30%
35%
40% 38%
22% 20% 20%
Targeted Gross Profit
Figure: Targeted Gross Profit
(Source: As created by the author)
Product Sales
Total
cost of
goods
Bikinis 1200000 746700
Board
Shorts 841500 660016
Towels 85800 68640
Beach
Bags 115200 92160

4PRICING AND SUPPLY CHAIN ANALYSIS
Bikinis Board Shorts Towels Beach Bags
0
200000
400000
600000
800000
1000000
1200000
1400000
1200000
841500
85800 115200
746700 660016
68640 92160
Target cost of goods sold
Sales Total cost of goods
Figure: Target cost of goods sold
(Source: As created by the author)
Providing recommendation on achieving the target
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).

5PRICING AND SUPPLY CHAIN ANALYSIS
Contribution of value chain to identify the value added and non-value added activities
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).
Providing Recommendations for the current prices of the four products compared with the
cost based and market-based pricing strategies
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).

6PRICING AND SUPPLY CHAIN ANALYSIS
Recommending the final price for the individual products
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.

7PRICING AND SUPPLY CHAIN ANALYSIS
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.

8PRICING AND SUPPLY CHAIN ANALYSIS
Vogel, H.L., 2014. Entertainment industry economics: A guide for financial analysis. Cambridge
University Press.