Cold Storage VS Knitwear
Quantitative facts:
Core Problem:
Poor decision making skills, analytical skills, coordination and negotiation skills between
the partners for selecting the business.
Other problems:
cold storage operating at full capacity.
No scope of expansion for cold storage.
All forecasting was based on full plant capacity which as per the report was to be attained
in the thrid year of the operation.
Profitability would be affected by the raw material prices and so would the sale price
owing to competitors.
No promotional budget alocated in the Profit and loss statement.
Solutions:
Owing to the data available the profitability of the cold storage is 867500(Total
revenues-total cost) and profitability according to the data of knitwear is 3904000(total
revenues-Total cost) but if we analyze it critically then the profit and loss statement of
Knitwear is overstated as it is being forecasted on full capacity utilization, raw material
price variation is not accounted in the calculations and promotional expenses are not
accounted for in the Profit and loss statement so i will suggest that they should opt for cold
storage since it is representing close to reality facts and figures.
They should rent out other cold storages for expansion and capitalize on the opportunity of
increased demand and earn higher profits.
The income statement should have accounted for the close to reality figures for the
forecasted income statement so that the decision making is easy and effective, currently it
is misleading.