ACC73001: Advanced Management Accounting Report - Sunny Days Analysis

This report provides a comprehensive analysis of Sunny Days, a company manufacturing swimwear and beach accessories. The report begins with an executive summary outlining the key aspects of the study, including budget planning, cost allocation, sales forecasting, and the identification of ending inventory costs. It delves into target price analysis, examining the profitability of each product category and setting target selling prices. The report then explores supply chain analysis, focusing on strategies to improve efficiency and reduce costs, with a goal of achieving a 20% profit margin. Value chain analysis is used to identify activities that add value to the customer experience. The study evaluates cost-based and market-based pricing strategies, ultimately recommending a pricing strategy. Finally, the report concludes with a final price recommendation for each of Sunny Days' products, aiming to maximize profitability. The report is based on data provided in the assignment brief, including sales forecasts, cost information, and budget schedules. The report also provides recommendations for improving the company's financial performance and achieving its strategic goals.

Running head: ADVANCED MANAGEMENT ACCOUNTING
Advanced management accounting
Name of the student:
Name of the University:
Author’s Note:

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Executive summary
The study sheds light on the budget planning for the Sunny days. This has provided idea on
the cost allocation in different overheads of the company’s activity. The study identifies the
revenue through the sales forecasting and the cost of ending inventory has also been
identified. The report explains the analysis of target price set by the company and further the
cost efficiency has been explained through analysing the impact of supply chain management
on the target profit margin. The study has explained impact of value chain in creating value
through the different activities and to the customers. The study undertakes a cost based
pricing strategy where the difference between market based pricing strategy and cost based
pricing strategy has been evaluated through understanding their advantage and disadvantages.
On the final stage the study develops a recommendation on the pricing strategy and identifies
the final price of the 4 product of the company.

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Table of Contents
Introduction................................................................................................................................3
Overview....................................................................................................................................3
Target price analysis..................................................................................................................4
Supply chain analysis.................................................................................................................5
Value chain analysis...................................................................................................................5
Pricing analysis..........................................................................................................................6
Final price recommendation.......................................................................................................7
Conclusion..................................................................................................................................7
References..................................................................................................................................9
Appendices...............................................................................................................................11

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Introduction
Developing a budget planning helps in identifying the required cost for the project.
The budgeting has been done either at time of expansion or at the time of forming a new
business opportunity for the new business entity or set up. However the budget planning
includes the identification of the expenditures and the cost associated with the project that are
going to be undertaken by the project owner. Hence for a better explanation the study
explains the required budget for depending on the allocation into the various overhead of the
company’s product. Further the study identifies the target price through analysing the target
profit margin. The study identifies the opportunity for improvement the supply chain
management process which would help in achieving cost efficiency through maintain a
required profit margin for the company. The study also explains the different pricing strategy
for their different products and generates a recommendation of setting a pricing strategy
depending different cost method. With understanding different pricing strategy the study also
develops a recommendation on the final pricing for the company’s different products which
would help the company to maximise the profit at the end.
Overview
The project represents a budget allocation into different segment of the four categories
of product that are manufactured by the company named Sunny days. The” Sunny days” is
involved in the retail service and manufacturing swimming product. The overview of the
company’s performance depends on the expected profit earning where the expected
expenditures, expected sales and expected unit production has been analysed. The allocation
of the production budget has been done depending on the cost allocation into different
overhead of the company. Providing the over view of the unit required this has been
recognised that the company aims to have a total production unit of 12400 in one year for the
“One piece”. The budget planning also estimates a total production unit of 11320 for the

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board shorts in the coming period. The production unit also estimated 2620 units of Towel in
total at the estimated period. The total production unit of Umbrella estimated at 1570 in total.
This also identifies a total 25078 machine hour required for the production. The budgets
planning estimates a total budget sales volume of 12500 unit for one piece product. This
generates a total sales of $1250000. Fir the board short the budget sales volume has been
estimated at 11420 units in total and this generates a forecasted sales of $913600. For the
Towel the estimated forecasted total sales unit is 2600 and this estimates a total sales of
$130000. For the umbrella the total budgeted sales unit has been estimated at 1560 at the end
of the year and this has a forecasted budgeted sales for beach bag at $70200. However, at the
forecasted period the total cash collection has been estimated at $2399450. The total accounts
payable has been estimated at 113955 for the company. Further the total direct labour used
for each of the product has been estimated at $702182. A manufacturing budget overhead has
also been calculated which has produced a total variable cost at $75234 and fixed cost
overhead at $138800 (Oluwagbemiga, Olugbenga and Zaccheaus 2014). The monthly
operating cost budget reflects an average operating expenses per month at $7112. The ending
inventory has been estimated at 800 units for One piece, 700 units for Board shorts, 220 for
Towel and 110 for Umbrella, however the total cost has been estimated at $120394 which has
been anticipated as the budgeted end inventory cost for the fore casted period. The estimated
budgeted sales has identified a cost of sales amounting $1803669 and this can produce a
gross profit margin at $560131.the net profit has been estimated after incurring all the
operating expenses is at $474790 for the forecasted period. At the end the monthly cash
budget represents cash balance of $526297 at the end of the year. However the total payment
has been estimated at $1905403.

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Target price analysis
The target pricing has been made depending on profitability in each category of the
product. The target sales price has been set at $100 for the One piece. The target selling price
set for the broad shorts is 80 per unit. For the Towel the target price has been set at 50 per
unit and for the umbrella the target selling price per unit has been set at $45. These pricing
strategy has been done through following cost based pricing strategy where the company has
emphasised on maximise profit through reducing the cost of product (Hu, Li and Shi 2015).
Supply chain analysis
The target profit margin has been represented through the net profit which is
estimated at 474790 (474790/2363800*100 = 20.1%). This can be achieved through bringing
efficiency into the production and management system. Reducing the operating expense
which also includes the supply chain management helps in enhancing cost benefit. Brining
technology into the supply chain management system this reduces the cost of delivery
(Govindan et al., 2014). Along with that an integration of strategic management system into
the supply chain process helps in reducing the cost of delivery. An adoption of the
Automating processes in the warehouse isn’t part of some fad or shady trend. It can actually
help the company to accomplish their goal of reducing supply chain costs (Joshi, Yesha and
Finin 2014). Introducing JIT inventory management system so that the company can order as
on need basis. This would reduce the carrying fee.
Value chain analysis
The value chain analysis helps in identifying those activities which does not add value
to the organizational activity. Value chain analysis collects the activities that are performed
by the company to create value for the customers (Mohajeri etal., 2014). Using the value
chain analysis the company identifies the internal activities that can be removed or added to
create value into the business process. This has been recognized that the primary activities of

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the value chain system adds value in the production process. With the help of bringing
efficiency in the operational process and inbound logistic process this adds value into the
primary activity for the company. The effective marketing strategy helps the company to add
value through generating more sales. However the supportive activities also adds value into
the business process through creating an effective human resource management process. The
effective R& D department also adds value through the supportive activity into the
company’s organizational development. The efficient procurement strategy through using
high technology also adds value in reducing procurement cost into the production process
(Montgomery and Oladapo 2014). While the primary activities add value into the company’s
internal activities and the supportive activities helps in development of the overall
management system and adds value towards the management system (Montgomery and
Oladapo 2014).
Example: The Company aims to reduce cost associated with the company’s primary activity,
the company would try to control the operational expenses and inbound logistic expenses.
Through this the company can reduce their cost of product and can maximise the profitability
(Ball et al., 2015).
Pricing analysis
The company has set their product price following the cost based pricing strategy. Following
the cost based pricing strategy, the company has able to reduce their cost so that the
competitive advantage can be gathered. However the market based pricing also gives a
competitive advantage through setting a competitive price of the product but after setting the
price on market based the owner does not hold any power to set the price (Niyato et al.,
2016). This means the price gets manipulated automatically depending on the market or on
the competitors’ activity, whereas the cost based pricing helps the company to identify the
cost reducing opportunity which gives the company a scope to reduce the cost of production

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through controlling production cost and operating cost. This provides an opportunity to
enhance profitability. Hence this has been recommended that the company should set their
price following the cost based pricing strategy. This would help the company to increase
profitability through controlling the cost of good and keeps the pricing power into the
owner’s hand (Kaddoura et al., 2015).
Final price recommendation
With the advantage of gaining more profit the company sets their product price using cost
based strategy. However, the product’s final price has been set at cost price which has been
represented as market price or the sales price of the product. This has enabled the company to
set the market price or the sale price of the One piece at $100 per unit, $80 per unit for the
Board short, $50 per unit for Towel and $40 per unit for the Umbrella. Hence the final price
has been set based on the forecasted market price which has been represented in the sales
forecasting of the budgeting.
Conclusion
The study has provided idea on the budget planning where the sales forecasting has been
done through assuming product’s future sales price. This has been identifies as the products
final price in the forecasted period. The study provides idea on the target pricing through
which the profit has been maximised. However the study also includes the pricing
compression using cost based pricing strategy and market based pricing strategy. The report
explains the effective supply chain management strategy which would help in reducing the
cost of the product price and enables the company to maximise the profitability. The study
also explains the effectiveness of the primary and secondary activity in adding value through
using porter’s value chain analysis model. Finally, the report develops a recommendation
over the company’s pricing strategy which helped the company to set a final price and
achieve profitability through reducing cost.

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References
Ball, R., Gerakos, J., Linnainmaa, J.T. and Nikolaev, V.V., 2015. Deflating
profitability. Journal of Financial Economics, 117(2), pp.225-248.
Govindan, K., Kaliyan, M., Kannan, D. and Haq, A.N., 2014. Barriers analysis for green
supply chain management implementation in Indian industries using analytic hierarchy
process. International Journal of Production Economics, 147, pp.555-568.
Hu, M., Li, X. and Shi, M., 2015. Product and pricing decisions in crowdfunding. Marketing
Science, 34(3), pp.331-345.
Joshi, K.P., Yesha, Y. and Finin, T., 2014. Automating cloud services life cycle through
semantic technologies. IEEE Transactions on Services Computing, 7(1), pp.109-122.
Kaddoura, I., Kickhöfer, B., Neumann, A. and Tirachini, A., 2015. Optimal public transport
pricing: Towards an agent-based marginal social cost approach. Journal of Transport
Economics and Policy (JTEP), 49(2), pp.200-218.
Mohajeri, B., Nyberg, T., Karjalainen, J., Tukiainen, T., Nelson, M., Shang, X. and Xiong,
G., 2014, October. The impact of social manufacturing on the value chain model in the
apparel industry. In Proceedings of 2014 IEEE International Conference on Service
Operations and Logistics, and Informatics (pp. 378-381). Ieee.
Montgomery, E.G. and Oladapo, V., 2014. Talent management vulnerability in global
healthcare value chains: A general systems theory perspective. Journal of Business Studies
Quarterly, 5(4), p.173.
Montgomery, E.G. and Oladapo, V., 2014. Talent management vulnerability in global
healthcare value chains: A general systems theory perspective. Journal of Business Studies
Quarterly, 5(4), p.173.

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Niyato, D., Hoang, D.T., Luong, N.C., Wang, P., Kim, D.I. and Han, Z., 2016. Smart data
pricing models for the internet of things: a bundling strategy approach. IEEE Network, 30(2),
pp.18-25.
Oluwagbemiga, O.E., Olugbenga, O.M. and Zaccheaus, S.A., 2014. Cost management
practices and firm’s performance of manufacturing organizations. International Journal of
Economics and Finance, 6(6), p.234.

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Appendices
Appendix 1:
Figure 1: Final price for 4 products of Sunny days
Appendix 2
January
February
March
April
May
June
July
August
September
October
November
December
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$337,000
$251,100$243,000
$192,400
$94,700 $83,800 $83,800 $97,800
$243,000$231,100$231,100
$275,000
Forecasted Revenue
Series1
Figure 2: Total forecasted revenue