Part 2, Management and Cost Accounting Essay

8333 WordsSep 20, 201434 Pages
PA R T I I Case study problems CASE 201 Permaclean Products plc David Otley, University of Lancaster The central issue in this case concerns product pricing. The analysis requires the estimation of appropriate costs and assessing price-demand information using past sales data. Permaclean Products is an old-established firm, located in Dunstable, manufacturing a comprehensive range of domestic cleaning materials. It has a sound reputation and a well-known brand name which has made it a market leader in a wide range of products designed for home use. Although Permaclean has several competitors, the total sales of each are small in comparison with those of Permaclean, mainly because none offers such a complete product range. In 2006 the price of one of Permaclean’s major products, Permashine, was raised from 75p per bottle to 99p when the product was repackaged in a newly designed bottle; however, the contents were identical to the previous pack, both in formulation and quantity. During the following two years sales fell by 27%. At 75p per bottle Permashine had been competitively priced but when its price was increased manufacturers of similar products had not followed. In the period from 2004 to 2007 the price of competing products had been raised by only 5p. Prices were fixed once a year, to come into force on 1 February, before the annual peak demand which occurred in the spring. In January 2008, John Williams, the marketing manager, met with Andrew Dutton, the chief accountant, to review the company’s pricing policy for the coming year. Permashine Permashine is a proprietary cleaning product for bathrooms and in 2005 had accounted for over 10% of the company’s sales. Although there are a variety of competing products on the market, Permashine has special properties which make it especially suitable for cleaning baths made of acrylic materials. Such

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