managerial accounting report- "cost and value chain analysis of vesta apparels”

7/30/2019 MANAGERIAL ACCOUNTING REPORT- "Cost and Value Chain Analysis of Vesta Apparels

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Cost and Value Chain Analysis of Vesta

Apparels

Prepared For:

Mr. Rakibul Hasan

Course: ACT-333Section: 01

Date: 17-12-2012

Prepared By:

Rifatul Ahsan Yasdany 102 0273 030

Nafees Imtiaz 102 0009 030

Syed Saadman Chowdhury 102 0918 030

Jonait Faruque 091 0859 030


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Cost and Value Chain Analysis

of Vesta Apparels


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Table of Contents

Executive Summary ........................................................................................................................1

Introduction .....................................................................................................................................2

Costing Strategy of Vesta Apparels ................................................................................................3

Full Cost of the Primary Product ...................................................................................................4

Value Chain Activities ....................................................................................................................6

Cost of Value Chain activity .........................................................................................................13

Calculation of BEP,BER and Margin of safety ..........................................................................14

Recommendation for better costing method ................................................................................18

Strategies to attract customers ......................................................................................................20

References .....................................................................................................................................24


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Letter of TransmittalDecember 17th , 2012

Mr. Rakibul Hasan

ACT-333

Faculty Member, School of Business

North South University

Bashundhara, Dhaka.

Subject: Submission of the Term paper

Sir,

It is an immense gratification for us to put forward this report on Cost and Value chain analysis

of Vesta Apparels to you, which you requested us to put in order as a confirmation of the

appliance of acquaintance you taught us in ACT-333 course.

On the process of preparing this report, we erudite to take steps as a cluster with each of us

working all the time on this project. It has helped us to expand a lot of knowledge about how

costing method is followed in reality and also helped us to evaluate the knowledge we learned in

the class room with its` real life application. This has farther enforced our confidence that the

things we learned will be truly required in realistic existence, rather than text or definitions to be

memorized and then over and done.

If for whichever cause, you are unable to deduce anything, please do not pause to contact us for

clarification at this mail:[email protected]. We hope you will forgive any of our mistakes,

lacking or inconveniences.

Sincerely yours,

Rifatul Ahsan Yasdany

Syed Saadman Chowdhury

Nafees Imtiaz

Jonait Faruque
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Executive Summary

The objective of this report was to find out about the costing method and value chain of

Vesta Apparels Ltd and analyze its key indicators to determine the riskiness of the company.

Through the project, we learnt that Vesta Apparels uses Job order costing method to determine

the cost of the product. We calculated the full cost for the primary product of Vesta Apparels,

which was found to be $22.26 including the profit margin. We also tried to find the per unit cost

of each value chain activities, based on assumptions and estimations. We found out the BEP in

units to be 115,285 units, and margin of safety to be 59,175 units. Using the calculation of

Degree of Operating Leverage value, we identified the company as a risky one. We evaluated the

present costing system, taking its disadvantages into consideration. An alternative cost

computation method, Activity Based Costing was suggested to the company to reduce its costs.

In the end, we suggested several ways which would enable Vesta Apparels to attract more

customers and become more profitable in the process.


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Introduction:

Vesta Apparels Ltd. Is a 100% export oriented Ready Made Garments manufacturing company.

In the year 2006, this manufacturing company was established. It has already successfully

established its name among the major apparel manufacturers in the country.

Its customers include companies like Matalan, McNeal, CUBUS, LPP, Dress Man, Uniform

Express Ltd, NDC, Texpoint SA, SINOSKY, and SRG Import etc from countries like UK,

Germany, France, Bolivia and more.

It is found that outsourcing is not just a trend but a reality. Vesta Apparels primary objective is

to capitalize on this opportunity and playing commendable role through using the

experience,skill and reputation as leading RMG manufacturer in Bangladesh for the overseas

counterpart. Their present focus is to work only for a handful and selective business partners who

has understanding of the aspects of manufacturing and quality control, beliefs in longer term

relationship, trust, the ability to negotiate with some drawbacks or difficulties that occur in

occasions.

The company strictly follows the AQL Inspection level Mark. The Organizations Quality

Assurance department is very sincere and strict in maintaining good quality standard during the

production and before the final release of the garments.

Vesta Apparels has developed a high level of professionalism. They develop the product from

ground up from fabric construction to sewing methods, from receiving an order to costing,

preparing layout, production to shipment. Since inception Vesta Apparels believes in building

and strengthening in-house resources and none of its employees or workers are hired or recruited

from abroad. Since birth the number of workers has doubled from 400 to more than 850 workers

with the growth of its business. Currently Vesta Apparels accommodates a good set of expertisefor prompt dealing and smooth operation complying with the nature of its product and activity.

They have the following departments: Production planning and merchandising, Pattern and

sample making, marker and cutting, sewing, quality assurance, finishing and merchandising. The


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daily capacity is 1200 shirts/Day-line. The company has a monthly production capacity of

250000 pcs and yearly turnover of $10.5 million.

Costing Strategy:

Vesta Apparels works based on the orders it gets. Each job or order varies in terms of varying

amount of quantity or different type of products like shirts, jeans etc. Each job requires varying

amount of resources. That is why Vesta Aparel uses the Job Costing Method to determine the

cost for a particular job. Even when multiple identical units of distinct products are produced,

they still use the Job Costing Method.

The Garment industry is divided in the following stages: Textile (spinning, weaving, knitting),

Dyeing (Colouring the fabric), Garment (Finished Goods Production- Cutting-Sewing,

Finishing).Costing May start at any stage or can be cumulative in nature. e.g a garment industry

(Finishing) would purchase raw materials until stage 2 and then cut it, sew it and finish it with

shipment.

Sometimes Previous stages are selected by factories so there is generally no pricing formula.

It solely depends on an order and the buyers choice. However a complete price can be charged.

In other instances, the whole job can be sub contracted or outsourced to other garmentscompany, especially when the volume of order exceeds the capacity of Vesta Apparels.

However, the main strategy remains Job Costing.


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Full Cost of the Primary Product:

JOB: MENS LONG SLEEVE SHIRTS-REF: NL1553-2.

JOB COST SHEET

Raw Materials

Fabrics $4.715

Buttons 0.062

Labels 0.049

Polythene 0.012

Hard Paper for collars 0.024

Printing & Embroidery 0.30

Total Raw Materials Cost $5.162

Labour costs

Direct Labour 0.80

Management and supervisors 0.35

Total Labour Cost $1.15

Finishing Dept. Expenditures

Trimming 0.625

Iron, wash and QC 1.20

Other Finishing expenses 4.00

Total Finishing Dept. Cost $5.825

10% Wastage loss $0.6975

Manufacturing Overheads

Accumulated MOH 4.2

Total Manufacturing Overheads 4.2

Commercial Expenses


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Bill of Lading, L/C & others 0.088

Total Commercial Expenses 0.088

TOTAL MANUFACTIRUNG COST

(FULL COST PER SHIRT) $17.1225

PRICE QUOTATION

TOTAL MANUFACTIRUNG COST 17.1225

Mark up (30%) 5.13675

Quoted Price per shirt $22.25925

FACTS

In most if not all garments manufacturing plants, only Direct Material costs are taken tobe variable, while all other costs are taken to be fixed costs.

In Bangladesh, the Minimum Wage of labour in the RMG industry is 3000 BDT, whichis equivalent to 37 USD.

ASSUMPTIONS

All costs are per unit of shirt. Accumulated MOH includes various overheads, individual data for which is unavailable. Direct labour costs are assumed based on the minimum wage rate. This per unit cost

primarily depends on the number of orders, while total labour cost is fixed.

Management and supervision cost is also a fixed cost, per unit figure is an assumptionand depends on the number of order.

Other finishing expenses include various activities required for finishing the product, datafor which is unavailable.

Commercial expenses include Bill of lading processing costs, banking charges, costs foropening Letter of Credit.


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VALUE CHAIN ACTIVITIES

Value chain is chain of activities by which a company brings in materials, creates a good or

service, markets it, and provides service after a sale is made. Each step creates more value for the

consumer. The value chain extends the definition to include marketing & sales and service. If we

look into the value chain of the RMG sector we will see lot of insight (see Figure 2). It is

important to note that value chain activities are not isolated from one another. Linkages exist not

only between the primary activities but also between the primary and support activities. When

these linked activities are preformed one after another maintaining a chain and managed these

from a supplier to a customer then it is supply chain management (SCM). Both chains overlay

the same network of companies. Both are made up of companies that interact to provide goods

and services. When we talk about supply chains, however, we usually talk about a downstreamflow of goods and supplies from the source to the customer. Value flows the other way. The

customer is the source of value, and value flows from the customer, in the form of demand, to

the supplier. That flow of demand, sometimes referred to as a demand chain is manifested in

the flows of orders. and cash that parallel the flow of value, and flow in the opposite direction to

the flow of supply. Thus, the primary difference between a supply chain and a value chain is a

fundamental shift in focus from the supply base to the customer. Supply chains focus upstream

on integrating supplier and producer processes, improving efficiency and reducing waste, while

value chains focus downstream, on creating value in the eyes of the customer.


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(Nuruzzaman, Ahasanul Haque and Rafq Azad, 2008)


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Downward Supply Chain flow chart for a knit garments factory

Supply Chain Analysis of the Industry

Lead Time

Lead time has been one of the deciding factors of efficiency in RMG business. Apparel sector is

no longer bi-seasonal and buyers have been pacing order 4-6 times a year to keep with the

changes in the fashion world. Therefore, quick delivery is considered as a strong competitive

advantage. Unfortunately Bangladesh has been performing poorly in this aspect. It takes almost

90-100 days before the buyer receives the goods. This is less than competitive compared to other

countries like China, India, Vietnam, Cambodia who can deliver the service much quicker.

Days Taken after preceding step

Components Optimal Time Non-optimal Time

Producer Receives LC 0 0

Yarn Fabric Dyeing

WashingPrintingEmbroidery

Accessories Production


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Raw material Supplier Receives LC 4 6

Supplier Produces and ships goods 15 30

Raw materials sails and reaches Ctg. port 21 30

Port Clearance and inland transportation 5 9

Garments Produced and shipped 20 30

Finished goods sails and reaches buyer 25 30

Total lead time 25 30

Total Lead Time 90 135

Table: Typical Lead time Components. (Source BGMEA)

Downward Supply Chain in Vesta Apparels

Downward supply chain management is one of the most important parts of an RMG factory. If a

factory is dependent on outside suppliers for the steps in it there occur various problems and the

production process hence the delivery of the product always face the a high level of uncertainty.

Detail description of Vesta Apparels downward supply chain scenario is given below.


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Cotton

Vesta Apparel imports cotton from USA (Fair Trade certified cotton, organic cotton, CIS

countries like Uzbekistan, Kazakhstan etc. In recent past Vesta Apparel imported from India and

Pakistan too.

Considerations for cotton import for Vesta Apparel are: Buyer requirement, compliance (e.g.

child labor issue), suitable source of the desired cotton, quality, homogeneity, price, certification

or protocols (which can be used as a selling point for the output) etc.

Even though cotton imported from CIS countries has a resentment of using child labor and

forced labor of children and adults alike and nowadays buyers are trying to avoid it, the quality

of CIS cotton is very good. It is handpicked with less contamination and lower price.

Yarn and Thread

Vesta Apparels produces only pure cotton yarn for knit fabric production. Other type of yarn

needed in knit fabric production whether it is mixed or pure type is bought from outside sources.

75% of these yarn types are collected from local factories and remaining 25% is imported from

foreign producers especially from China. More than 90% of the knitting units cotton yarn

demand is fulfilled by the spinning unit and remaining cotton yarn is bought from local

producers.

Yarn sourced from outside are for example:

Polyester Elasten CVC PC Mellange Lycra Viscose Modal


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Knitting

The current machine capacity is also used for outside factorys fabric production as Vesta

Apparelss knit fabric is also produced in outside factories. It is because the characteristics of the

machines are varied and the internal machines cannot produce all types of knit fabrics for Vesta

Apparels garments. All types of woven fabric needed for garments are bought from outside

which is very low in quantity.

Fabric needs prior booking with a lead time of 30-90 days depending on type of fabric and

availability of the machines. Sometimes availability of yarn also influences the lead time.

Dyeing

The dyeing unit of Vesta Apparels can only dye the knit fabric. Currently the performance of the

dyeing unit of Vesta Apparels is quite satisfactory as it meets all the demands of the garments

unit on time in most cases.

But there is one concern for the garments in terms of dyeing. Vesta Apparels does not have any

yarn dyeing facility which in turn makes the knitting unit wait for the arrival of the dyed yarn

after they send the yarn outside for dyeing in another factory. It increases the lead time and

hampers in regular operational routine of the unit. As a result, the garments unit faces difficulty

with the production and subsequently the delivery of the garments. To alleviate this problem

Vesta Apparels should establish a yarn dyeing unit.

Washing

Washing is needed before and after the garments is made. Some fabrics are washed before it

reaches the garments for various operational conveniences and some garments need wash after it

is made. 50-60% garments produced in Vesta Apparels garments unit need washing. This

capacity is dependent on Dryer, Fabric, Type of wash, quantity in a lot etc. In time of necessity


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the washing unit also does overtime. The lead time of washing unit is 6 hours for washing and

1.5 hours for drying process.

Printing

The types of printing available here are:

Embroidery

The embroidery unit has color capacity up to 12 colors of thread and the capacity in quantity

produced always depends on design. The capacity of embroidery is lower than necessary and the

remaining are done outside. Vesta Apparels generally does not face severe problem with the

receipt of embroidery part from the outside factories since there are some designated embroidery

factories that specializes on embroidery and Vesta Apparels is one of the main buyers for them.

Accessories

Accessories management is the prime headache for Vesta Apparels as its accessories unit cannot

deliver the needed items on time. The main problem with quality is the communication with theMaterial Management (MM) department and relevant support of the accessories unit.

Pigment

Embossed

High density rubber

Burn out

Discharge print

Crack print

Foil

Glitter

Photo print

Viyellatex Printing unit


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The normal lead time of the unit is:

Sample lead time: 1 week Button sample production

time: 3 days

Button Bulk production

lead time: 10-15 days

Hanger: 15 days Poly Bags: 8 days Label: 10 days

Care Label: 7 days Tweed: 8 days Elastic: 8 days

Costs of Value Chain Activities

Transportation $ 3,703

Information and communication 1600

Testing and Inspection 870Material handling & storage 1278

Information System 860

Warehouse 1800

Sundry value chain expenses 1221

Total cost 11.332

**All costs illustrated above are for one month, since average time required to process an

order is 30 days.

**Costs are assumed as actual figures were not disclosed by the company.


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Calculation of BEP, BER and Margin of Safety

BREAK DOWN OF COSTS

Total Variable Cost per unit of shirt:

Fabrics $4.715

Buttons 0.062

Labels 0.049

Polythene 0.012

Hard Paper for collars 0.024

Printing & Embroidery 0.30

Total Raw Materials Cost /VC per unit $5.162

Total Fixed Cost per unit of shirt:

Labour costs $1.15

Finishing Dept. Expenditures 5.825

Manufacturing Overheads 4.2

Commercial expenses 0.088

Total Fixed Cost per unit $11.263

The manufacturing plants total capacity per month is 250,000 units.

Assuming 70% of total capacity is used for a particular production order for export, we get

175,000 units produced in a month for one particular job order.

Therefore,

Budgeted sales units= 175,000 shirts


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Total Fixed Cost= $11.263*175,000 shirts= $1,971,025

Selling price per shirt = $22.25925

CALCULATIONS & PERFORMANCE MEASURES

(a) Contribution Margin per unit = Sales price per unit- VC per unit

= $22.25925- $5.162

= $17.097

Total contribution margin = $17.097* 175,000units =$3,009,475

(b) Breakeven point = Fixed cost / CM per unit

= $1,971,025 / $17.097

=115,285 shirts

(c) Breakeven Revenue = 115,285*$22.25925

= $2566, 158

(d) Margin of Safety = Budgeted sales units-Breakeven sales units

= 175,000- 115,285

=59,175 shirts

COMMENTS ON THE RISKINESS OF THE COMPANY

In order to measure the riskiness of the company, an effective tool is Degree of Operating

Leverage.

Operating Income = Total revenue-Total Costs

= (175,000*$22.25925)(175,000* 17.1225)


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= $ 898,931

Degree of Operating Leverage= Contribution Margin / Operating Income

= $3,009,475 / $ 898,931

= 3.35

Operating Leverage describes the effects that fixed costs have on changes in operating income

as changes occur in units sold and contribution margin. This company has a very high proportion

of fixed cost in the cost structure, since all costs except direct materials are considered to be

fixed, and hence have a high operating leverage.

From the above result ofDOL of 3.35, we can infer that when budgeted sales of 175,000 is

achieved, a percentage change in sales and contribution margin will result in 3.35 times that

percentage change in operating income.

A company with high fixed costs is comparatively riskier compared to those with lower

proportion of fixed costs as the Contribution Margin is lower. This company has a high fixed

cost structure, with fixed costs amounting up to $1,971,025, hence it tends to be riskier than an

average company in the apparels industry.

Margin of Safety percentage = Margin of safety in Dollars / Budgeted sales indollars

= ($22.25925 * 59,175) / (175,000*$22.25925)

=0.338 or 34%

The Margin of Safety Percentage of 34% indicates that the gap between budgeted sales and

breakeven sales is quite large, hence from this perspective we may conclude that the

company is in a comparatively risk free position.


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THE FIGURES AT A GLANCE

CONTRIBUTION MARGIN PER UNIT $17.097

TOTAL CONTRIBUTION MARGIN $3,009,475

BREAKEVEN POINT 115,285 shirts

BREAKEVEN REVENUE $2,566, 158

MARGIN OF SAFETY 59,175 shirts

MARGIN OF SAFETY PERCENTAGE 34%

DEGREE OF OPERATING LEVERAGE 3.35

OPERATING INCOME $ 898,931


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Recommendation of a better costing Method

As we have already stated that Vesta Apparels uses the Job order costing system to determine the

cost of production. Although there are some advantages to this system, but there are some major

disadvantages as well.

One is that it focuses attention primarily on products rather than on departments or activities.

This is not an issue if there are supplemental systems in place that record information about these

other cost categories, but it leaves management with inadequate information if this is not the

case.

Another difficulty is that overhead is generally allocated based on rates that are changed only

about once a year. Considerable fluctuation in overhead costs over the course of a year can result

both in over and under allocation of overhead costs to jobs during that period.

Since overheads are allocated on estimation this method may not yield 100 percent accurate

result and may lead to errors while quoting the price for a product or service.

The most important problem with job order costing is that it requires a major amount of data

entry and data accuracy in order to yield effective results. Data related to materials, labor, and

overhead, indirect labor, scrap, spoilage, and supplies must be entered into system capable of

accurately assigning these costs to the correct jobs every time. In reality such systems are

extensive with mistakes due to the sheer volume of data transactions, keying errors,

misidentification of jobs, and the like. Problems can be resolved with a sufficient amount of error

tracing by the accounting staff, but there may be so many that there are not enough staff

members to keep up with them. Though these issues can to some degree be resolved through the

use of computerized data entry system outweighs the benefits to be gained from it.

A final issue is that a large proportion of the costs assigned to a job, frequently more 50%, comefrom allocated overhead. When there is no fully proven method for accurately allocating

overhead, such as through an activity based costing system the results of the allocation yield

meaningless information. This has been a particular problems for the companies that persist in

allocating overhead costs based on the direct labor used by each job, Since a small amount of

labor is generally being used to allocate a much larger amount of overhead, resulting in large


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shifts in overhead allocations based on small amount of labor is generally being used to allocate

a much larger amount of overhead, resulting in large shifts in overhead allocations based on

small changes in labor costs. Some companies avoid this problem by ignoring overhead for job

order costing purposes or by reducing overhead cost pools to include only overhead directly

traceable at the job level. In this way, many costs are not allocated to jobs at all, but those that

are allocated are fully justifiable.

Due to these drawbacks, we recommended a different costing system for Vesta Apparels to

follow. We recommended Activity Based Costing for Vesta Apparels so that it could reduce the

cost of production through accurate allocation of overheads.

Activity based costing (ABC) assigns manufacturing overhead costs to products in a more

logical manner than the traditional approach of simply allocating costs on the basis of machine

hours. Activity based costing first assigns costs to the activities that are the real cause of the

overhead. It then assigns the cost of those activities only to the products that are actually

demanding the activities.

Activity based costing system have the following main benefits:

More accurate costing of products for customers, as a result the cost of product may wellgo down.

Overhead are allocated accurately. Easier to understand for everyone. Utilizes unit cost rather than just total cost. Integrates well with Six Sigma and other continuous improvement programs. This is

important, since Vesta Apparels claims to be very conscious about the quality of the

product.

Identifies waste and non-value added activities. Supports performance management and scorecards Enables costing of processes, supply chains, and value streams It facilitates benchmarking; therefore the management can compare results to improve

performance.


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Strategies to attract customers

1)Join local business organizations. Many, such as home-based business groups, are

inexpensive to join. And the marketing benefits are huge. Once they get to know you and what

you do, the other business people in your group will mention your business to others and may

even give you referrals. Local business organizations are also great opportunities to create and

participate in some cooperative marketing strategies. So it will be a good strategy for Vesta

Apparels to be in close touch with BGMEA and BKMEA to be always informed what is

happening in the entire industry. An important thing is Be Found Locally.

2) Create or become front and center in a charitable event. Now days, foreign buyers

sometimes take a deep look at a companys social audit. You can get huge amounts of press for

events like thiswhich can translate into new customers. Many charities have established events

that you can become a very visible part of by becoming a sponsor.

3) Create your own Blog- Use a build audience of people who would be interested in your

products and/or services. Creating a blog is easier than creating a website - and savvier too. write

regularly about topics related to your business and what your business is doing. You'll start

connecting with other bloggers, business people and potential customers.

4) Join and use Twitter. Vesta apparels should use a variety of social media. Example: Twitter,

LinkedIn, Zorphia, Alibaba. As for marketing strategies, be sure you don't use Twitter

exclusively to promote your product but to find and converse with like-minded people who may

be interested in what you're doing.

5) Internet. New Look plans to establish a presence on the Internet by developing a website.

Plans are underway to develop a professional and effective site that will be interactive and from

which sales will be generated worldwide. In the future, this is expected to be one of the

company's primary marketing channels.

6) Participate in different trade shows and set trade show appointments: In the garments sector,

trade shows in different countries still remain as the most effective tool of marketing.
http://sbinfocanada.about.com/cs/successprogram/a/week7.htmhttp://sbinfocanada.about.com/cs/successprogram/a/week7.htmhttp://sbinfocanada.about.com/cs/successprogram/a/week7.htmhttp://sbinfocanada.about.com/cs/successprogram/a/week7.htm


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Industry trade shows are often THE place to demonstrate products and network. Participating in

trade shows can be expensive. One way to enhance your chances of success at a trade show is to

use your website to encourage visitors to your booth, and to set sales appointments.

Vesta Textiles should use their websites to list the trade shows that they will be attending. Thegoal here is to help your sales team set appointments at the booth.

Assuming you have a page on your website for Trade Shows, and that you can create a

separate registration page for each show, here are some tactics to consider:

You would have a short paragraph at the top of the page, highlighting how Vesta apparels

participates in a series of trade shows for the machine tools industry throughout the year.

STRATEGY & IMPLEMENTATION

5.1 PHILOSOPHY

Manufacturing's business philosophy is to make the needs of our customers our main priority. It

is our mission to provide our customers with fast turnaround, exceptional quality, unparalleled

customer service and competitive pricing. With the introduction of our patented Virtual Design

Center program and the unveiling of our modern design and manufacturing facility, we will

position Vesta Apparels as a superbly innovative company and a future industry leader.

We will implement the most comprehensive design software and set the highest standards of

operational systems and quality control.

5.2 INTERNET STRATEGY

Our plan is to position Vesta Apparels as a technology-driven innovative company within the

textile-manufacturing sector of the manufacturing industry. To do this, we are putting forth a

great amount of time and resources into developing a premiere Web site. We are working with a

design firm and have secured a domain name - www.vestastyle.com. We have already initiated

the process of integrating our Virtual Design Center into the site.


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In addition to describing our manufacturing processes and design capabilities.. Our site will also

include a simple online form to complete for custom quotes as well as a generic form to submit

questions and comments. Our vision is to create a Web site that will become an integral part of

our marketing, sales and daily operations.

5.3 MARKETING STRATEGY

Vesta Apparels recognizes the critical importance of marketing. We will require a properly

designed and executed marketing plan to ensure market penetration and business success. Until

we hire an in-house sales and marketing team, we will work with a marketing and public

relations firm. Once a sales and marketing staffs are in place, we will reassess the need for an

outside firm.

In addition to conveying to our potential customers the fast turnaround, exceptional quality,

unparalleled customer service and competitive pricing offered by Vesta Apparels, we will also

position our company as future-minded and a leader in the integration of innovative technology

into the textile manufacturing process.

Our marketing plan will include an initial publicity campaign that introduces our company and

patented Virtual Design Center. Further, we will launch a comprehensive advertising campaign

in trade publications and related Web sites. The publicity campaign will be closely followed by a

direct-mail campaign to targeted customers.

The other main component of our marketing plan will be to attend trade shows which will

require booth construction and maintenance, marketing materials such as brochures, and

promotional items such as pens with our logo.

To increase local awareness of our company and to foster a positive public perception, we will

participate in and sponsor local charity events such as Walk for the Cure and youth sports teams.

We will also reach out to local high schools and colleges to offer internships and promote careers

in manufacturing.


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5.4 SALES STRATEGY

Vesta Apparels will build a sales team focused on securing new business in the short and long

term. The sales team will be motivated by commissions and performance-based bonuses.

Under the direction of executive management, we will employ an outside sales staff as well as an

inside sales staff. The outside sales staff will focus primarily on trade show attendance,

comprehensive follow up, relationship building, closing deals, and securing referrals.


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References:

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3. http://www.accountingcoach.com/online-accounting-course/35Xpg01.html4. http://accounting4management.com/limitations_of_activity_based_costing.htm#UAXByj

tGxc8U12EE.99
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