Luxor Cosmetics Executive Summary Essay

head word 12008 protean manufacturing salute as a percentage of exchange price Product(variable star manufacturing address/WSP Production)Mark up Lipstick16.8/2180%(21/16.8)-125% learn glow10.5/1570%(15/10.5)-143%Creams2.8/5.650%(5.6/2.8)-1100%2010ProductLipstick15.3/1885%(18/15.3)-118%Nail polish9.3/11.680%(11.6/9.3)-125%Creams3.3/6.650%(6.6/3.3)+1100%*Note that these calculations be do for goods crapd in the grade in question movement 2( terms of goods fabricate in 2008/ gross revenue value for units assignd in 2008) * ending inventory 2008 (16.8/21) * 11.59.748million enquiry 3Luxor uses a FIFO inventory system, so the inventory that is change firstly in truth may come from prior years. Because of this, goods that argon sold in each year need to be separated into goods produced in that year and goods produced in prior years. This is obligatory to do because the percentage of the COGS that is variable is around different from year to year. 2009 live of Goods change 6.3M from inventory on hand at beginning of year (produced in 2008 to a lower place FIFO) 2.3M from inventory produced in 2009 2010 hail of Goods change 8.2M from inventory on hand at beginning of year (produced in 2009 under FIFO) 0.3M from inventory produced in 2010 We at one time must(prenominal) determine the percentage of COGS that is variable for goods produced in 2008, 2009 and 2010200810.5M/(10.5M+0.7M) =93.75%20099.8M/(9.8M+0.7M) = 93.333333%20109.3M/(9.3M+0.6M) =93.939393%We now apply these percentages to the COGS for 2009 and 2010 to determine the entirety variable cost for each year. 2009 varying COGS = (6.3M * .9375) + (2.3M * .93333333) = $8.0529M 2010 un trusted COGS = (8.2M * .93333333) + (0.3M * .9393939393) = $7.9352M Assuming the variable manufacturing cost per unit was the same in 2009 and 2010, a higher variable cost of goods sold means that more units were sold. Since the variable COGS in 2009 is higher in 2009 than it is in 2010, we hind quarters conclude that the gross revenue volume of hold polish decreased in 2010. Question 4 permit x = break in Even SalesF = Marketing & adenine promotion + General Administration + Interest + dictated Manufacturing termss Let F = integrality Fixed CostsF = 3.4 + 1.3 + 1.8 + 1Let V = Variable Costs Per Dollar of Sales7.5V is easily estimated by (COGS-Fixed Costs) /Salesthither is a small amount of mend cost in COGS which means that it is non strictly variable, but for our purposes that makes a actually(prenominal) small, immaterial difference and the question solo requires an approximation.V = (27.7-1)/33.50.7970x = F + Vxx = 7.5 + 0.7970x0.2030x = 7.5x = 36.95 bomb even sales are approximately $36.95 MillionQuestion 5Let x = Break Even SalesF = Marketing & ampere forwarding + General Administration + Interest Let F = Total Fixed CostsF = 3.3 + 1.3 + 1.1 + 1Let V = COGS Per Dollar of Sales6.7Again, V is easily estimated by COGS/Salesthither is a small amount of pri med(p) cost in COGS which means that it is non strictly variable, but for our purposes that makes a very small, immaterial difference and the question plainly requires an approximation.V = (27.7-1)/33.50.7970x = 33.00x = F + Vxx = 6.7 + 0.7970x0.2030x = 6.7The virgin breakeven sales for 2012 would be approximately 33.00, given that 2012 is approximately interchangeable to 2011. The firm is more likely to breakeven than the earlier year if they can keep their sales constant and do not produce more than they can sell. Although with current trends of sales over the past few years, it could be estimated that breakeven is not likely. With the current trends sales could be estimated somewhere around 32 million, in which case the firm would not breakeven in 2012. Question 6armory docket 2011 Budget stock listLipstickNail PolishCreamsInventory (12/31 2010 Actual)15.011.41.2 mean Production * 19.013.08.0Goods Available for Sale34.024.49.2Budgeted Sales19.013.08.0Ending Inventory (12/3 1/2011 Budget)15.011.41.2* Planned production is to produce the same amount as the plan sales, as per sales managerBudgeted Cost of Goods Manufactured and Sold 2011 Budget Variable Manufacturing Cost (Budget)0.90.90.617.911.74.4Fixed Manufacturing Cost (Budget)0.80.60.6Cost of Goods Manufactured18.712.35.0Inventory (12/31/2010 Actual) 13.69.60.7Goods Available for Sale32.321.95.7Inventory (12/31/2011 Budget)0.90.90.614.110.40.7Budgeted Cost of Goods Sold 18.211.45.1MARGINS1.01.11.60.00.10.6Variable Manufacturing Cost First, beget the factor of Variable Manufacturing cost to planned production, less(prenominal) frozen manufacturing costi.e. 6.8/(8.0-.0.8) = 0.9 (From designate 2)Inventory hap the factor of budgeted ending inventory cost to budget inventory value i.e. 6.6/7.0 = 0.9 (from Exhibit 2)Margins (Budgeted Sales/Budgeted Cost of Goods Sold) 1 i.e. (19.0/18.2) 1 = 1.0 (rounded)Income Statement 2011 BudgetCash Flow 2011 BudgetSales40.0Cash improvement From Cust omers40.0Cost of Goods Sold34.7Gross Margin5.3Cash disbursementsMarketing & Promotion3.6Variable Manufacturing34.1General Administration1.3Fixed Manufacturing1.0Interest1.8Marketing and Promotion3.6Pretax Income-1.4General Administration1.3Interest1.8Pro-Forma Year-End Balance public opinion poll 2011 BudgetTotal Disbursements41.8 As gradesCash0.0Beginning Cash5.5Miscellaneous Current Assets3.0+ Receipts40.0Inventory0.0- Disbursements41.8Property & Equipment11.2- Loan Repayment10.0Good ordain9.3Ending Cash (Budgeted)-6.3Total Assets23.5Equities lingo Loan16.3Miscellaneous Current Liabilities4.0Common Stock12.5 kept up(p) clams *9.7Total Equities42.5* The Retained Earnings are 9.7 in this budget, which is ad yeted from the old budget to account for an additional $0.7 M lossi.e. 10.4 0.7 = 9.7Question 7 by dint of the implementation of the suggested changes in allocation, more of the stiff costs volition be allocated to the scan products because this product line has th e highest margin (as shown in the budgeted Cost of Goods Manufactured above), even though creams wee the lowest total sales value. This will lead to more of the determined costs being incorporated into the Cost of Goods sold, and not into the ending inventory numbers, accordingly decreasing pre-tax income even further. Allocating the fixed costs in this manner would not regard the Cash Flow Statement in any commission, as the fixed costs would still lead to a exchange disbursement of an equal value disregardless of which product line they are allocated to.Question 8Luxor Cosmetics is a troupe that is stuck in a dying market because about of their customers that cloud the lipstick and nail polish are women aged 45 to 75 who are in the lower income group. As that group gets older and older they have less need for cosmetics so they buy less and less. The sales will elapse to drop and we will get less and less profitable. A way to fall upon this is to reposition ourselves in the market. We need to find a way to get ourselves into a burst market that is more vehement to buy cosmetics. One way of doing this would be to start targeting a new demographic of women who will buy our products. We could also void the non-wholesale market because that way we would get bigger orders and be able to budget better. save if we do this we will have to grapple the possibility that we will have to lower our prices and we will have less wage in the end but we will have more sales. We should reinvest in the go with that we purchased in the 1990s. We had a product that we were discharge to aim at teenagers but we put away the alliance due to the dotcom crash we should reflection at getting that company running. We should reinvest in the company that we abandoned because the market has find now.We would get a brand new customer base and we could have change magnitude sales. Plus we already own the company and it does no benefit to us just sitting on the books n ot generating any profits. It is an environmentally friendly product and environmentally friendly products are becoming more and more popular today. We could make the company seem very socially creditworthy and that would build us a better reputation and may make our sales in our existing company append substantially. The goodwill that is on the books today was acquired when we bought the environmentally friendly company in the 1990s and yet we have not revalued it since then. The plus impairment test should be done on goodwill to see how untold of the goodwill exists any longer. It is possible that the asset of goodwill should not exist on the books for Luxor at all anymore.And it is just making our fiscal statements conduct for investors. If we adjust this properly we will have a more virtual(prenominal) picture of our company as it stands now. This way we will not have misleading financial statements anymore. There are a few ethical issues in the case. The first is that the re is pressure for the numbers to be fudged, but as a  passkey accountant that cannot be done. We do not want to make the statements misleading so that the bank is coaxed into giving us a loan that we cannot afford. We cannot fudge the statements to meet our ask because someone would figure it out and we would not get away with it and overall it is highly unethical. The other is following the policy that is set in place for how to account for certain things. If our inventory is not usable anymore we should not be keeping it on the books hoping it will make us discover better. This is not appropriate and should be compose off and adjusted for the fact that it is now obsolete.