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acc 3302 case 2-Roxbury Manufacturing Company...................




Question;CASE 2;Roxbury Manufacturing Company;by;Khursheed Omer;(Modified by Alicia A. Yancy);Roxbury;Manufacturing Company is a privately owned business. Products manufactured by Roxbury had been;doing very well until the year 2011. The;last two years have seen a steady decline in sales and profit. If this declining trend continues, the;company might come under financial distress. Income statements for the last two;years are given below.;Year;1 Percent Year 2 Percent;Sales $;5,000,000 100 $ 4,500,000 100;Less;Variable Expenses $;3,750,000 75 $;3,375,000 75;--------------------------------------------------------------------;Total;Contribution Margin $;1,250,000 25 $;1,125,000 25;Less;Fixed Expenses $;1,000,000 $;1,000,000;---------------------------------------------------------------------;Net Income before taxes $ 250,000 $ 125,000;==========================================;Mr. Creighton, the owner of the company;is baffled that only a ten percent decline in sales has resulted in a twenty;percent decline in profits. He asks you;to explain to him how in spite of maintaining efficiency in operations by;keeping variable expenses and contribution margin at the same percentage level;he has experienced a greater percentage decline in profits.


Paper#38776 | Written in 18-Jul-2015

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