1 Assuming Brokerage fees of 6000 calculate the amount of ca

1. Assuming Brokerage fees of $6000, calculate the amount of cash needed to retire Baldwin\'s 11.2S2027 bond early.

A. $5,785,949 B. $5,523,846   C. $5,529,846

2. Suppose you were hired as a consultant for a company that wants to penetrate the Comp-XM market. This company wants to pursue a niche cost leader strategy. From last year’s reports, which company would be the strongest competitor?

A. Digby B. Chester C. Baldwin D. Andrews

3. Digby has a new design for their product Dixie next round that can reduce their material cost of producing units from $8.14 to $7.32. Digby passes on half of all cost savings by cutting the current price to customers. For simplicity: - Use current labor costs of $4.03 - Assume all period costs as reported on Digby\'s Income Statement (Annual Rpt Pg 2) will remain the same. Determine how many units (000) of product Dixie would need to be sold next round to break even on the product.

A. 1,306 units. B. 1,064 units. C. 1,004 units. D. 803 units. E. 951 units. F.1,983 units

4.The Baldwin company will increase its automation for the Bold product by 2.0. Assuming no further change in capacity, how much will this investment in automation cost?

Solution

Q 1

Answer Choice : C

Q 2

Answer Choice : C - Baldwin

Rationale

A Niche Cost Leader will seek to gain a competitive advantage by keeping all costs - materials, production, R & D and Sales costs - lower than its competitors.

The Niche Cost Leader strategy will focus on Traditional and Low End product segments. A company following a Niche Cost Leader strategy will seek to penetrate and capture the market with a price pitched lower than its competitors. The focus will be on improved size and peformance, increased use of automation in its production. Overtime will be a preferred option as compared to investing in capacity enhancement.The company will also be spending less on advertising and marketing products to its target segments.

In order to determine the Niche Cost Leader among Andrew, Baldwin, Chester and Digby, comparisons are made based on Return on Sales, Contribution Margin %, SG & A/ Sales %, Asset Turnover, and Return on Equity based on the information provided in the question.

It can be observed that Andrews leads on all parameters except Return on Sales ( or Operating Profit Margin), where Baldwin scores. The focus in a Niche Cost Leader Strategy is operating costs,i.e., Materials, SG & A, and Research, are kept to a minimum. Interest and Taxes are not considered for determiming Operating Margin. Further, Baldwin\'s SG & A/ Sales - % is the lowest as compared to its competitor.

In absolute terms, Chester has the lowest operating costs, but when computed as a % of sales, it does not compare with Andrews or Baldwin.

Answer

Therefore, from the Niche Cost Leader strategy point of view, Baldwin\'s operating costs are the lowest. Hence, Baldwin is the strongest competitor. The cloest competitor to Baldwin is Andrews.