Brandon Production Is a Small Firm Focused on the Assembly

question 118

Essay

Brandon Production is a small firm focused on the assembly and sale of custom computers. The firm is facing stiff competition from low-priced alternatives, and is looking at various solutions to remain competitive and profitable. Current financials for the firm are shown in the table below. In the first option, marketing will increase sales by 50%. The next option is Vendor (Supplier) changes, which would result in a decrease of 10% in the cost of inputs. Finally there is an OM option, which would reduce production costs 25%. Which of the options would you recommend to the firm if it can only pursue one option? In addition, comment on the feasibility of each option.
Business Function Current Value
Cost of Inputs $50,000
Production Costs $25,000
Revenue $80,000

---

Definitions:

Financial Position

The status of a company or individual's assets, liabilities, and equity at a specific point in time, summarizing the economic resources and obligations.

EBIT

Earnings Before Interest and Taxes - a measure of a firm's profitability that excludes interest and income tax expenses.

Accounts Payable

Accounts Payable is the amount of money a company owes its suppliers for goods or services received but not yet paid for.

Basic Earning Power Ratio

A financial ratio that shows how effectively assets are being used to generate earnings before the influence of taxes and financing costs.