NCI corporation - Assignment Example

al Affiliation Number Case study written assignment Question 1Financial management to Roger’s business relates to the situation where Roger has to send away some workers during the slowdowns. Mew manager should be hired since the present manager has not helped to control the problem of slowdowns wisely rather than laying off the workers. In marketing, the business is not well organized, and nobody knows how to market the new product. Workers in the marketing department should be replaced since in the firm nobody knows how the new product can be marketed.

Question 2The operating margin for manufacturing caskets is about 40 %. This is the margin NCI corporation already had the capability to produce for the casket market. On the other side, the traditional margin for manufacturing the caskets was about 23%. On average, 23% is the operating margin NCI Corporation previously incurred for the new product. The increase in the number of discounters in the casket market results to reduced prices of caskets. , the margin increases with the increase in the casket suppliers in the market.

The discounters such as the wholesalers, retailers, and other manufacturers do not incur the similar costs incurred by the funeral homes. Therefore, they sell the caskets cheaply and still make a profit because there are low production costs involved. In addition, the discounters sell caskets in large scale thereby enjoying the economies of scale.Question 3The number of caskets, I will sell to the different target purchasers depend heavily on the respective buying price the target buyer will offer.

I will provide 50 Caskets to the funeral homes. This will be the highest number of caskets I would like to sell. To the retailers, I expect to sell around 60 caskets while the wholesalers will get around 100 caskets.To achieve the figures, I assumed a constant 40 % margin and particular profits for each purchaser target. For instance, I assumed $ 500,000 profit in the case of funeral homes, $ 180,000 profit in the case of the retailers and $ 250,000. In addition, I assumed $ 50,000 net income, $ 120,000 capital expenditure and investment return worth $ 250,000.

Question 4 Norfolk Cabinet Inc. (NCI) Consolidated Statements of Cash Flows (Amount in $) Fiscal Year and amountOperating activitiesNet Income 50,000Adjustments to net cash flows Net gain on the sale of caskets 930,000Net Cash provided by operating activities 930,000Financing activities Purchase of caskets500,000Net Cash provided by financing activities (500,000)Investing activities Capital expenditure(120,000) Return on investment250,000Net Cash provided by investing activities 130,000Net cash flows 1,060,000Cash and cash equivalentsAt beginning of the period 60,000At end of period 1,170,000 NCI Case assignment discussion1.

There are various risks associated with NCI’s entry into the casket selling. First, the firm risk losing all the retrenched workers. Secondly, involvement in the new business is risky since neither Roger nor his adviser knows about the marketing of the products. Lastly, the firm risks getting customers for her products since nobody in the business knows the targeted consumers for the caskets.2. The firm’s sale will increase at the rate of diminishing returns throughout the year. In the casket industry, many discounters are coming in with cheaper ready-made caskets.

With time, the firm is likely to lose some of its customers to the cheaper caskets offered by the discounters. Therefore, the high sales volume will only be experienced at the beginning of the year and will later reduce. NCI will benefit from not hiring back the workers. The estimated benefits are likely to be $ 400,000. On the other side, failure to retrain the workers also saves the corporation the training costs. NCI is likely to benefit an estimated $ 150,000.3. The operating margin for manufacturing caskets is about 40 %.

This is the margin NCI corporation already had the capability to produce for the casket market. On the other side, the traditional margin for manufacturing the caskets was about 23%. On average, 23% is the operating margin NCI Corporation previously incurred for the new product. The margin for manufacturing caskets is subject to change following the changes in the target purchaser. The increase in the number of discounters in the casket market result to reduced prices of caskets. The margin increases with the increase in the casket suppliers in the market.

The discounters such as the wholesalers, retailers, and other manufacturers do not incur the similar costs incurred by the funeral homes. 4. The number of caskets, I will sell to the different target purchasers depend heavily on the respective buying price the target buyer will offer. I will provide 50 Caskets to the funeral homes. This will be the highest number of caskets I would like to sell. To the retailers, I expect to sell around 60 caskets while the wholesalers will get around 100 caskets.

To achieve the figures, I assumed a constant 40 % margin and particular profits for each purchaser target. For instance, I assumed $ 500,000 profit in the case of funeral homes, $ 180,000 profit in the case of the retailers and $ 250,000. In addition, I assumed $ 50,000 net income, $ 120,000 capital expenditure and investment return worth $ 250,000.5. Income Statement Norfolk Cabinet Inc. (NCI) Income Statement At March 2015 (Amount of $) Assets 2015Cash 930,000Accounts receivable 50,000Inventory 60,0001040,000Liabilities and Owners Equity Accounts Payable (500,000)Retained Earnings (130,000)(630,000)Total Owner’s Equity410,0006.

NCI should not proceed with the manufacture of the caskets. With the increasing number of discounters in the casket business, the returns are likely to be low. In addition, the sale of caskets to other people other than the funeral homes is legally prohibited. It may bring a challenge to the NCI casket business.On the other side, NCI should not gear down for the slow season. Slowing down usual puts Roger in a perilous situation. He may end up losing his income from both sides especially if the casket business cannot continue.

Instead, Roger should learn to manage his finances efficiently even during the recessions. Work CitedStretcher, Robert, and Timothy B. Michael. Cases in Financial Management. N.J: Prentice Hall, 2005. Print.