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Posted: December 31st, 2020
Accounting Asap
Question description
Option #1: Analysis of Payton Furniture Corp.Payton
Furniture Corp. is nationally recognized for making high-quality
products. Get research paper samples and course-specific study resources under homework for you course hero writing service – Manage ment is concerned that the company is not fully
exploiting its brand power. Payton’s production managers are also
concerned because their plants are not operating at near full capacity.
Get research paper samples and course-specific study resources under homework for you course hero writing service – Manage ment is currently considering a proposal to offer a new line of
affordable furniture.Those in favor of the proposal (including
the vice president of production) believe that, by offering these new
products, the company could attract a clientele that it is not
currently servicing. It could also operate its plants at full capacity,
thus taking better advantage of its assets.The vice president of
marketing, however, believes that the lower-priced (and lower-margin)
product would have a negative impact on the sales of existing products.
The vice president believes that $10,000,000 of the sales of the new
product will be from customers that would have purchased the more
expensive product but switched to the lower-margin product because it
was available. (This is often referred to as cannibalization of
existing sales.) Top management feels, however, that even with
cannibalization, the company’s sales will increase and the company will
be better off.The following data are available:(In Thousands)Current ResultsProposed Results without CannibalizationProposed Results with CannibalizationSales Revenue$45,000$60,000$50,000Net Income$12,000$13,000$12,000Average total assets$100,000$100,000$100,000Instructions:Compute Payton’s return on assets, profit margin, and asset turnover, both with and without the new product line.Discuss the implications that your findings in part (A) have on Payton’s decision.Are there any other options that Payton should consider? What impact would each of these have on the above ratios?Show
your work and use MS Excel or Word for your submission. The written
portion of your assignment should be 4-6 pages in length with document
and citation formatting conformity with the CSU-Global Guide to Writing and APA Requirements.
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