Maple Hill Dairy Farm Case Study Solutions

Assess the competitive environment of Maple Hill Dairy Farm and determine what you think is or should be Maple Hill’s competitive strategy and explain why. Evaluate Laura’s plan to move from glass bottles to plastic and paper containers.

Answer:

Competitive environment of Maple Hill Dairy Farm

Based on the information provided by the case study, Maple Hill Dairy Farm is a small family-owned business. They take pride in their high-quality dairy products produced and sold in health food markets, supermarkets, and Maple Hill Country Store. The popular products have provided an excellent competitive environment by providing strong brand loyalty among the customers in the region. The environment makes it possible for the organization to control the sales price in an attempt to gain more customers and earn more market share.   

Maple Hill’s competitive strategy 

Part of Maple Hill’s competitive strategy includes packing its products in glass bottles which is appealing to many of its targeted customers. Even though using glass bottles has proven to be expensive, the strategy can be seen as a competitive factor that attracts customers to purchase the products in the region.

Laura’s plan to move from glass bottles to plastic and paper containers

Laura is concerned about the financial outlay that the organization would incur upon the expansion. To minimize costs and attract more customers, she plans to move from glass bottles to plastic and paper containers. The current direct cost of packaging the product in a glass bottle is $.75 per bottle, which is expensive compared to packaging the farm’s product in plastic and paper containers. Therefore, the plan can be considered cost-effective, considering it will reduce the packaging costs by about one-third of the current cost. Similarly, the cost of the bottling equipment for filling the plastic or paper containers would fall to one-half the cost of the current equipment within six months. However, all other operational costs would remain the same. Therefore, the use of plastic or paper containers and the brand reputation of the farm’s products could be leveraged to attract new customers and increase sales. The plan can also serve well in attracting new supermarkets and other retailers that do not presently handle bottles.   

Determine the unit costs for each of the five products given the available information. How could you improve on these calculations? What additional information would your request, and how would you use it?

Answer:
The unit costs for the products

A unit cost can also be explained as the cost of goods sold (COGS), which is the total expenditure incurred to produce, store, and sell one unit of a particular product. Given the available information, the unit costs for each of the five products include the following:

• Chocolate Milk - $1.90
• Eggnog - $2.25
• Low-Fat Milk- $1.90
• Skim Milk- $1.90
• Whole Milk- $1.90 per quart

How to improve the calculations 

Some of the ideal ways to reduce cost per unit include reducing the overhead costs and increasing product sales. The calculations can also be improved by finding less expensive materials to use and evaluating the production processes to look for ways to make them more efficient.

Additional information required

Improving the calculations for unit costs would also require additional information showing the overall costs involved in producing the products offered by Maple Hill Dairy Farm. The information can be portrayed by a cost sheet statement which consists of factory costs, premium costs, cost of goods sold (COGS), and total costs. Thus, collecting, analyzing, and reporting the cost information can serve well in improving the calculations. In addition, the information makes it easier to produce an effective budget, forecasting and monitoring the costs.

3. Use the information in the case above to determine the ABC-based unit costs for Maple Hill’s products. How does this information help Laura analyze her decision regarding the change in containers from glass to plastic and paper?

Answer:

The activity-based costing (ABC) is a system that determines the costs of overhead activities and assigns them to the products. The ABC-based unit for Maple Hill’s products involves tracing resource consumption and cost per unit. The approach enhances the reliability of cost data to determine the true costs. It has also been utilized in classifying the costs incurred by the company during its production process for the products per unit. Thus, the information can be valuable for Laura in analyzing her decision regarding the plan to change from glass to plastic and paper bottles. In addition, it shows that Maple Hills can continue serving its customers with quality dairy products even after the changes are implemented.