At the beginning of 2017, Bega Cheese purchased Vegemite from the US food company, Mondelez International (Smith, 2017; Worthington & Jasper, 2017). The Board considered that the combination of vegemite and cheese was a good fit and provided diversification for the business. Financing was provided in part by a sale of some Victorian processing plants (Fitzgerald, 2017) which were then leased back to the company.
Currently Bega Cheese is looking at further expansion, potentially, through a merger or asset buy out of Murray-Goulburn (Smith, 2017), funded by capital raising.
Part A
In recent years, directors and CEOs of companies have been placing more importance on holistic reporting of company activities rather than simply reporting what is required by the Accounting Standards, the Corporations Act and other legislation. The Global Reporting Initiative (GRI) is an international not-for-profit organisation that has pioneered and developed the world's most widely used voluntary Sustainability Reporting Framework.
In 2013, the fourth iteration of the Sustainability Reporting Framework guidelines were released. Bega Cheese's website includes statements concerning Business Sustainability.
Required:
With specific reference to Section 5.1 of the Sustainability Reporting Guidelines of the GRI, your task is to write a report that:
1. Provides an overview of the environmental and social impacts (positive and negative) of Bega Cheese's operations.
2. Identifies and discusses four key GRI disclosures that are likely to be of most relevance to the stakeholders of Bega Cheese and reviews whether this information is provided by the firm.
3. Compares the quality and depth of environmental performance information provided by Bega Cheese with the practices of Murray-Goulburn.
4. Evaluates whether widespread compliance with the GRI guidelines by Australian food businesses would benefit potential investors, current shareholders and other stakeholders of Bega Cheese.
The assignment needs to be thoroughly researched and presented in a standard report format including:
1. Executive summary
2. Table of contents
3. Introduction
4. Body
5. Conclusion.
The report is to be 1,500 words in length. References must be clearly acknowledged in-text and in the reference list and in accordance with APA style.
Part B
A key part of Bega Cheese's growth strategy has been to look at opportunities beyond dairy (Worthington & Jasper, 2017). Leveraging this idea, they could develop a product that has its basis in the Vegemite concept but focuses on the current craze for healthy food and that should have a more international appeal than Vegemite. The name for this vegetable based chunky spread is Vegadora.
Required:
1. Identify the likely major costs associated with the ongoing operations of the Vegemite production line.
2. Estimate the cost behaviour (fixed, variable or otherwise) of each of the major costs identified above in requirement.
3. Given your understanding of the cost behaviour of the major costs associated with the ongoing production of Vegemite, critically evaluate whether the use of break-even analysis would be a useful and reliable screening tool for Bega Cheese as they assess the desirability of producing this new product.
4. Develop a balanced scorecard that could be used to evaluate the success of Bega Cheese's strategy to sell this product internationally. For each perspective, identify one objective and include a lead and lag measure for each objective. You should make use of both financial and non-financial measures (the table below can be used to summarise your findings).
5. Briefly discuss the key features of your scorecard and the reasons behind your chosen measures.
Part C
The sales team have investigated the hypothetical product Vegadora and have developed three (3) concept flavours; Mediterranean, Thai and French which they have priced as below. The management team for the Vegemite production line have developed an analysis of the costs for each of the flavours listed below:
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Mediterranean
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Thai
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French
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Selling price
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$4.50
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$4.50
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$6.00
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Labour
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$1.00
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$1.00
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$1.50
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Materials
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$1.50
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$1.75
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$2.00
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Variable overhead
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$.50
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$.25
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$.75
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Expected sales p.a.
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160,000
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140,000
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100,000
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Other costs associated with the Vegadora each year will include:
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Equipment depreciation
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$200,000
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Rent
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$40,000
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Marketing
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$150,000
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Other
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$30,000
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The firm's tax rate is 30%.
Required:
1. Calculate the number of Mediterranean, Thai and French flavour sales of Vegadora that will need to be made to:
1. break-even, and
2. achieve an after-tax profit of $350,000 (provide workings).
2. Prepare a memo which suggests a number of possible strategic initiatives that Bega Cheese could implement in relation to the Vegadora concept to enhance the break-even point and/or annual profit. These initiatives could impact the firm's sales mix, selling prices, variable or fixed costs. Provide workings which illustrate how your proposed initiatives could influence the break-even point and forecast profit.
Rationale
Assessment Task 2 is designed to assess your understanding of the learning outcome ‘Explain and evaluate the concepts behind the management decision processes associated with the efficient allocation of business resources' covered by Topics 5, "Social and Environmental Accounting", and Topic 6, "Management Accounting and Professional Ethics".