luxor cosmetics executive summary essay

Essay Topics: Fixed costs, Sama dengan,
Category: Business and industrial,
Words: 1693 | Published: 02.20.20 | Views: 409 | Download now

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Question one particular

2008Variable manufacturing expense as a percentage of selling price Product(Variable production cost/WSP Production)Mark up Lipstick16. 8/2180%(21/16. 8)-125%

Fingernail polish10. 5/1570%(15/10. 5)-143%

Creams2. 8/5. 650%(5. 6/2. 8)-1100%

2010

Item

Lipstick15. 3/1885%(18/15. 3)-118%

Fingernail polish9. 3/11. 680%(11. 6/9. 3)-125%

Creams3. 3/6. 650%(6. 6/3. 3)+1100%

*Note these calculations are done for products produced in the year in question

Query 2

(cost of goods manufactured in 2008/ sales benefit for products produced in 2008) * ending inventory 2008 (16. 8/21) * 10. 5

9. 748million

Question three or more

Luxor uses a FIFO inventory system, so the inventory that is sold first actually may come by prior years.

Because of this, merchandise that are sold in each year should be separated in to goods produced in that 12 months and products produced in previous years. This really is necessary to do because the percentage of the COGS that is adjustable is different from year to year. 2009 Cost of Goods Sold:

6. 3M from products on hand on hand by beginning of year (produced in 08 under FIFO) 2 . 3M from inventory produced in 20092010 Cost of Items Sold: 8. 2M by inventory readily available at beginning of year (produced last season under FIFO) 0.

3M from products on hand produced in 2010We now need to determine the percentage of COGS that is variable for products produced in 2008, 2009 and 2010:

08

15. 5M/(10. 5M+0. 7M) =93. 75%

2009

9. 8M/(9. 8M+0. 7M) = 93. 333333%

2010

9. 3M/(9. 3M+0. 6M) =93. 939393%

We now apply these proportions to the COGS for 2009 and 2010 to determine the total variable price for each yr. 2009 Variable COGS = (6. 3M *. 9375) + (2. 3M 2.. 93333333) = $8. 0529M 2010 Variable COGS = (8. 2M *. 93333333) + (0. 3M 2.. 9393939393) sama dengan $7. 9352M Assuming the variable manufacturing cost per unit was your same in 2009 and 2010, a higher variable cost of products sold implies that more products were marketed. Since the variable COGS in 2009 is larger in 2009 than it is in 2010, we can determine that the sales volume of nail polish decreased in 2010. Problem 4

Allow x sama dengan Break Even SalesF = Marketing & Promotion + General Administration & Interest & Fixed Manufacturing Costs Permit F = Total Set CostsF sama dengan 3. four + 1 ) 3 + 1 . almost 8 + one particular

Let V = Variable Costs Per Dollars of Sales7. 5

Sixth is v is easily predicted by (COGS-Fixed Costs) /Sales

There exists a small amount of fixed costs in COGS which means it is not firmly variable, however for our reasons that makes a really small , immaterial difference plus the question only requires a great approximation.

Versus = (27. 7-1)/33. a few

0. 7970

x = Farrenheit + Vx

x = several. 5 + 0. 7970x

zero. 2030x = 7. 5

times = thirty-six. 95

Break even product sales are around $36. 96 Million

Question 5

Permit x = Break Even SalesF = Promoting & Promotion + Basic Administration & Interest Let F = Total Set CostsF = 3. a few + 1 ) 3 + 1 . you + one particular

Permit V sama dengan COGS Per Dollar of Sales6. 7

Again, Versus is easily estimated by COGS/Sales

There is also a small amount of fixed costs in COGS which means it is not strictly variable, however for our purposes that makes a very small , negligible difference plus the question just requires a great approximation.

V = (27. 7-1)/33. five

zero. 7970

times = thirty-three. 00

x sama dengan F & Vx

x sama dengan 6. six + 0. 7970x

0. 2030x = 6. 7

The modern breakeven product sales for 2012 would be approximately 33. 00, considering the fact that 2012 is around similar to 2011. The firm is more likely to breakeven than the previous 12 months if they will keep their sales regular and do not generate more than they can sell. Even though with current trends of sales in the last few years, it may be estimated that breakeven can be not likely. With all the current developments sales could be estimated about 32 million, in which case the firm may not breakeven in 2012. Question 6th

Inventory Schedule ” 2011 Budget

InventoryLipstickNail PolishCreams

Products on hand (12/31 2010 Actual)15. 011. 41. a couple of

Prepared Production * 19. 013. 08. 0

Products Available for Sale34. 024. forty-nine. 2

Budgeted Sales19. 013. 08. 0

Ending Inventory (12/31/2011 Budget)15. 011. forty one. 2

2. Planned production is to generate the same amount as the planned sales, according to sales manager

Budgeted Cost of Goods Produced and Offered ” 2011 Budget Variable Manufacturing Expense (Budget)0. 80. 90. 6th

seventeen. 911. 74. 4

Fixed Production Cost (Budget)0. 80. 70. 6

Cost of Items Manufactured18. 712. 35. zero

Products on hand (12/31/2010 Actual) 13. 69. 60. six

Merchandise Available for Sale32. 321. 95. 7

Inventory (12/31/2011 Budget)0. 80. 90. six

18. 110. 45. 7

Budgeted Cost of Goods Marketed 18. 211. 45. 1

MARGINS1. 01. 11. 6

0. 00. 12. 6

Changing Manufacturing Expense ” Initially, find the factor of Variable Manufacturing cost to planned production, less fixed manufacturing expense

i. electronic. ” six. 8/(8. 0-. 0. 8) = 0. 9 (From Exhibit 2)

Products on hand ” Discover the factor of budgeted ending products on hand cost to budget products on hand value my spouse and i. e. ” 6. 6/7. 0 sama dengan 0. 9 (from Exhibit 2)

Margins ” (Budgeted Sales/Budgeted Cost of Goods Sold) ” 1 my spouse and i. e. ” (19. 0/18. 2) ” 1 sama dengan 1 . 0 (rounded)

Income Statement ” 2011 BudgetCash Flow ” 2011 Spending budget

Sales40. 0Cash Invoices From Customers40. 0

Cost of Merchandise Sold34. several

Low Margin5. 3Cash disbursements

Marketing & Promotion3. 6Variable Manufacturing34. one particular

Standard Administration1. 3Fixed Manufacturing1. 0

Interest1. 8Marketing and Promotion3. 6th

Pretax Income-1. 4General Administration1. 3

Interest1. 8

Pro-Forma Year-End Balance Sheet ” 2011 BudgetTotal Disbursements41. eight Assets

Cash0. 0Beginning Cash5. your five

Assorted Current Assets3. 0+ Receipts40. 0

Inventory0. 0- Disbursements41. almost 8

Real estate & Equipment11. 2- Mortgage Repayment10. zero

Goodwill9. 3Ending Funds (Budgeted)-6. 3

Total Assets23. five

Equities

Bank Loan16. 3

Miscellaneous Current Liabilities4. 0

Common Stock12. 5

Maintained Earnings *9. 7

Total Equities42. 5

5. The Stored Earnings will be 9. several in this price range, which is modified from the past budget to account for yet another $0. several M loss

i. electronic. ” 10. 4 ” 0. 7 = being unfaithful. 7

Problem 7

Through the setup of the advised changes in allocation, more of the set costs will probably be allocated to the cream products because this products has the top margin (as shown inside the budgeted Expense of Goods Produced above), though creams have the lowest total sales worth. This will cause more of the fixed costs being incorporated in the Cost of Items sold, and never into the stopping inventory amounts, therefore reducing pre-tax income even further. Allocating the fixed costs in this fashion would not affect the Cash Flow Assertion in any way, as the fixed costs would still lead to a funds disbursement of the equal worth regardless of which will product line they may be allocated to.

Question 8

Luxor Cosmetics is a company that may be stuck in a dying market because most of their customers that buy the lip stick and nail polish are women outdated 45 to 75 whom are in the lower income group. As that group gets older and more mature they have significantly less need for makeup so that they buy much less. The sales will always drop and we’ll get less and less profitable. Ways to combat this is to shift ourselves available in the market. We need to find a way to receive ourselves to a better market that is more eager to purchase cosmetics. One way of doing this is always to start focusing on a new market of women that will buy our products. We could also enough time non-wholesale market because doing this we would increase orders and be able to budget better. However if we do this all of us will have to consider the possibility that we will have to reduce our rates and we will possess less income in the end although we may have more product sales. We should reinvest in the organization that we bought in the nineties. We had an item that we were gonna aim at young adults but we abandoned the company due to the dotcom crash; we ought to look at obtaining that company running. We ought to reinvest inside the company that people abandoned because the market provides recovered right now.

We would get a brand new customer base and we could have increased sales. Additionally we already own the firm and it can do no gain to all of us just seated on the ebooks not creating any revenue. It is an eco-friendly product and environmentally friendly items are becoming a lot more popular today. We could make the company seem to be very socially responsible and that would build us an improved reputation and could make our sales in our existing business increase greatly. The goodwill that is on the books today was bought when we bought the environmentally friendly company in the 1990’s and yet we have certainly not revalued that since then. The asset impairment test must be done on goodwill to see simply how much of the goodwill exists anymore. It is possible that the asset of goodwill must not exist within the books for Luxor by any means anymore.

In fact it is just producing our monetary statements misleading for shareholders. If we adapt this effectively we will have a more practical picture of your company since it stands today. This way we can not have misleading financial claims anymore. There are a few ethical concerns in the case. The very first is that there is pressure for the numbers being fudged, but as aprofessional scrivener that can not be done. We do not want to make the statements deceptive so that the traditional bank is coaxed into providing us credit that we cannot afford. We simply cannot fudge the statements in order to meet our demands because someone might figure it away and we probably would not get away with it and overall it can be highly dishonest. The different is following a policy that may be set in place for how to be the cause of certain things. If the inventory is usually not workable anymore we should not end up being keeping it on the literature hoping it will make us look better. This may not be appropriate and should be drafted off and adjusted pertaining to the fact it is now outdated.

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