Case Teaching Package
A case teaching package is available for this case. It includes strategies for case presentation, key concepts, solutions to the assignment questions in the case, and suggestions for the most effective ways to work this case into your course.

Length
This case is 6 pages in length and its case teaching package is 10 pages.

Abstract

This case is set in Denmark in 1967 when the "boom" in consumer food products was just beginning—more working mothers, more disposable income, more choices in convenience food products. Should the company, a food products manufacturer, introduce "complete meal" products to enhance the product line?

A/S Dansk Minox (DM), a company in Copenhagen, Denmark, manufactures and markets a variety of vacuum-packed cooked meat products. The consumer puts together a meal by either combining the pre-prepared packages (sold by DM and its competitors) or by adding home-prepared ingredients to the pre-prepared packages. DM has 30 products and enjoys a solid market position. DM's sales are about D.Cr. 9.5 million. In the late 60s, DM concludes that there is a huge market potential for pre-prepared complete meals consisting of several ingredients grouped together in a single attractive package. DM's assessment of the market potential is based on a number of factors during that time period:

1. The percentage of women in the work force is on the rise. "Working mothers" have a strong preference for pre-prepared complete meal products.
2. There is high growth potential for "convenience" foods.
3. People now have more disposable income to spend on food products.
4. Introduction of "imaginative" food products is growing.

Linkages to Textbooks or Journal Articles/Fit Within a Course

We use this case in the required course on Managerial Accounting. The case teaches very well if used early in the term. The case reinforces the breakdown between fixed and variable costs (contribution analysis and full cost analysis). A significant benefit in using this case early in the course is that it illustrates very nicely the importance of integrating cost analysis with strategic and business considerations. The case can be covered in one class period (90 minutes).

This short case is an excellent classroom vehicle to generate good discussion regarding a number of key issues in managerial accounting:

1. Identifying fixed and variable costs. Practice in calculating contribution and full cost profits.
2. Cost allocation rules for factory overhead.
3. Cost analysis for pricing new products.
4. Integrating financial, marketing, and manufacturing considerations in evaluating new product ideas.
5. Blending operational considerations (e.g. excess capacity) and strategic thinking in evaluating a new product introduction.

Study Questions

1. Once the decision was made to introduce the "complete meal" product and to advertise it according to the plan, what was the impact on profit in 1966 (before taxes) of selling 30 tons at a retail price of Cr. 8.20?
2. Once the decision had been made to introduce the "complete meal" product and to advertise it according to the plan, what would have been the impact on profit in 1966 (before taxes) if 85 tons had been sold at a retail price of Cr. 6.85?
3. Combining questions 1 and 2, which retail price would produce more incremental profit for the firm in 1966, and how much more?
4. What sales volume is required at a retail price of Cr. 6.85 to give the same profit impact in 1966 (before taxes) as selling 30 tons at a retail price of Cr. 8.20?
5. What is the total unit cost and per unit profit for 1 Kg of "complete meal" at a retail selling price of Cr. 6.85 and with an allocation of Cr. 1.20 for production fixed expenses?
6. How much production fixed expense should be allocated to 1 Kg of "complete meal"? Give a specific number and your logic to support the number.
7. What is your recommendation to management regarding the new "complete meal" product for 1967?

The downloadable file for this case is in Microsoft® Word 7.0 for Windows®.

If you do not have Microsoft Word, you can download the free Microsoft® Word Viewer 97 right here:   For Windows 3.x   For Windows 95

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