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STUART DAW Co. Stuart Daw Co. is a typical medium-sized coffee roaster. The C.E.O. and the administrative management have prepared the budget for the year 2019 Chart 1 shows the most relevant assumptions of the budget: the demand is supposed to remain approximately the same as in 2018 (market growth rate- 0). Nowadays, Stuart Daw Co. has a market share of 20% (volume) and the goal is to increase it up to 25% in the next year CHART 1: Assumptions for the budget Sales volume (quantity in pounds) Green Coffee Costs (per pound) Plant Costs (labor and other overhead) Total Cost of Coffee & Production Other operating expense: selling and administrative (on 1,000,000 $ 6 1,000,000 $ 7,000,000 $2,000,000 historical basis) The relations with customers and the administration of orders are the major causes of selling and administrative expenses. The market is segmented in three categories of customers: restaurants and hotels, offices, retailers. Avarage size of Percentage on sales Restaurants and hotels Offices Retailers orders (pounds) 100 10 50 volume (budget) 40% 20% 40% The capacity levels are the following: 1. for manufacturing department: 1,250,000 pounds per year; 2. for selling and administrative department: 35,000 orders Required: What should be the price of a pound of coffee assuming that the goal for 2019 is a 10% Ros-in each segment of the market? Draw up the pro-forma income statement. Use alternatively the push and the pull approaches to costing. What would happen if Stuart Daw Co.s main competitors decided to sell the coffee at $ 12 per pound? Would Stuart Daw still be competitive?

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