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Improvement Project of Science Construction CS

Abstract Science Construction’s business is in planning, developing and building road projects. The major of its clients are municipalities, city governments, and other public sector entities. While the bankruptcy rates for these clients is very low, when economic downturns happen, their ability to pay in a timely fashion also suffers. This leads to businesses such as Science Construction needing to take on additional debt and to find creative methods in order to stay afloat during times of recession. Methods such as selling accounts receivables at discounted rates and taking larger lines of credit through banks and other lending institutions are some of the ways organizations can remain viable when their cash inflows have turned into a trickle. Science Construction is asking the Turkish Courts to postpone their bankruptcy proceedings for a year while they attempt to restructure. Through this, suggestions such as forcing shareholders to pay their debt to the organization, gaining credi
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Blaze Manufacturing decision making


Introduction

This paper is about the company Blaze Manufacturing which is a textile manufacturing company in New York. The company manufactures per order and does not mass produce inventory items. Joe is the president of the company, since the foundation 20 years ago. Bill is the lead salesman of the company. Wendy is a temporary controller, till the place is filled again. Bob is the plant manager of the company. Omega Consulting Partners provides consulting and management advisory services to companies, which also include Blaze manufacturing. Wendy is the financial and management consultant of Omega and temporarily functions and controller at the Blaze manufacturing company. The completion is high in the U.S., especially with foreign producers, who are excluded from many of the environmental and safety regulations which

impose additional costs on domestic companies (Causseaux & Caster, 2016).



Bill recently negotiated a large order form which he thinks the company will make a huge profit. Wendy as a controller performed a profitability analysis and found that the company will make no profit with the order. This paper is about discussing the analysis of Wendy and recommend the best decision for the company (Causseaux & Caster, 2016).



Problem definition in financial terms

There is a discussion between the controller and the lead salesman about accepting a large order. The controller thinks this order will not be profitable for the company, while the lead salesman is sure that the order will be profitable and bring a huge amount of revenue for the company (Causseaux & Caster, 2016). 



Operational situation(s) that created the problem

Wendy made the decision based on examining the whole manufacturing process. Without knowing the whole manufacturing process, it is not possible to make a statement about the costs. So Wendy walked through the whole manufacturing process to make an accurate financial analysis. After calculating the gross margin profit and the contribution margin profit, both analysis showed that the company would make no profit by accepting this order (Causseaux & Caster, 2016).



Possible alternatives

The gross profit has been determined. The gross profit is the net sales minus the cost of the goods sold (Bond & Auerbach, n.d.). The contribution margin has also been determined. The contribution margin is the sales revenue minus the variable cost (Contribution Margin Definition, n.d.). Both of them has been determined per unit and showed no profit. In the case can be seen that maximum 80 items can be made a day. The same analysis can be done for 80 items. The variable cost will increase. But the fixed costs like salary is determined per working hours and not per unit. So the salary will be a fixed value per day. If the gross profit margin will be determined per 80 items, then it can be determined if the order can be accepted or not. The data for decision is now limited, because the analysis has only been done per unit and not per day or per whole order.









Plan of action

The plan for now is to do further analysis. Each day 80 units can be made. How many units will be made for this order? The fixed costs will be fixed every day. The variable cost will be varying per unit needed to be produced. The gross profit margin and contribution margin needs to be done per day and also for the total units which are needed for this order. The fixed cost like salary will be the same every day, so the profit margin may change after doing further analysis. If the company will have a gross margin and contribution margin profit, then the order can still be taken.



Importance and relevance of the study

This case study is important for the decision making process. Only looking at the costs per unit limits the data for deciding whether to take the order or not, because of the difference in fixed and variable costs. It is good to have such a case to empower the critical thinking of the student on how to decide based on broad financial analysis.



Limitations

The gross profit margin has been done for the case study per unit. What also can be done is the breakeven analysis. This will show how much units at least needs to be made to no profit at all. And after this can be decided if the order will be cancelled or the price should be increased to make the ordered amount. The amounts of units to be made is missing. The salaries per person per hour and how many units are made in one hour. This information could give a more detailed result about what to decide about this order.



References



Bond, E., & Auerbach, A. (n.d.). How to Analyze Profitability. Retrieved from Edward Lowe Foundation: https://edwardlowe.org/how-to-analyze-profitability-2/

Causseaux, W. K., & Caster, A. B. (2016). Blaze Manufacturing: An Ethical Analysis. Journal of Business Case Studies, 12(1).

Contribution Margin Definition. (n.d.). Retrieved from Investopedia: https://www.investopedia.com/terms/c/contributionmargin.asp

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