Mary Willis is the advertising manager and she would like to take the chance hereby to communicate to Bargain Shoe Store Management about some transformations that should be put into place to help increase the profit of the firm. Following a keen assessment of the store's finances, she has formulated some proposals to carry out appropriate changes that will assist the quantity sold to rise from 20000 to 24000.
To start with, a major promotional campaign to make the public aware of your commodity is important. This campaign will aim to increase the fixed costs from the current $270000 to $294000 (a total increase of $24000). This this is for the increased display space and a state of the art new lighting system. This is in the effort to display our shoes in better lighting and in a more modernized fashion to appease customers and our visitors.
Mary Willis strategy has brought transformations to the finances. The breakeven point in units will shift from .84 to .87. In terms of dollars, the break-even point shifts as well from $675000 to $794595. The contribution difference will shift from 320000 to 33600. Safety ratio margin deviates from 16% to 13%. These changes altogether will lead to a shift in revenue in revenue from $50000 to $42000.
It is clear that while fascinated with the transformations produced by Mary Willis some issues rose up about the breakeven points and the extent of safety. There will be an increase in the breakeven point as it has been depicted by the figures and the margin of safety will go down. However, the sales are anticipated to go up and generate more from $800000 to 912000.
The breakeven point will decrease with time while on the other side the margin of safety hikes up. It is understandable that concerns will always be there when the numbers are not all changing for the better and these changes will bring in new positive changes as time passes. As the innovations changes, it is crucial to maintaining the happiness of our customers and making them aware of our wish to continue serving them in the best way (Kimmel, 2015).
Any business firm has a great role in ensuring the satisfaction of the customers which is the most integral part of all businesses (Zimmerman & Yahya-Zadeh, 2011). Changes will always cause expenses especially at the beginning but the organization must always be willing to adjust and accept to take up these expenses from time to time (Kimmel, Weygandt & Kieso, 2016). The transformations are crafty and won't cause great challenge to finances of the company involved. The anticipated sales increment is a good effect and the continued growth ability bringing the numbers similar as they are currently and more positive numbers.
By now it is a sound thought that Bargain Shoe Store should take the risk and faces the trivial negative changes in order to achieve massive positive changes that Mary Willis has generated. Putting her proposal into considerations, a 6-month test to prove she has projects accurately and nothing needs to be set, and the time to decide to move on with her proposals or move in another direction.
I take this opportunity to thank all of you for investing your time to review my suggestions put across by Mary Willis in this memo. I urge you to consider reviewing this memo alongside the spreadsheet attached herein with the breakdown of numbers in details. I hereby request you to give a response on the recommendations concerning this memo when you get some free moment.
Kimmel, P. (2015). Financial Accounting + Wileyplus: Tools for business decision making. S.l.: John Wiley.
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2016). Accounting: Tools for business decision making.
Zimmerman, J. L., & Yahya-Zadeh, M. (2011). Accounting for decision making and control. Issues in Accounting Education, 26(1), 258-259.
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