You have built your career on your ability to control the variable expenses within your picture framing
Question:
You have built your career on your ability to control the variable expenses within your picture framing company. Now you are considering purchasing another picture framing business. You believe that most picture framing businesses do a poor job of managing COGS – which represents a big opportunity for you to increase profits quickly. You have identified four different businesses that make $100,000 per year profit. Their income statements are as follows:
Adam’s FramesBob’s FramesCarl’s FramesDee’s FramesAnnual revenue$139,000$133,000$126,000$141,000ExpensesFraming material:
$5,000
Glass, wire: $2,000
Utilities: $15,000
Marketing: $15,000
Insurance: $2,000Framing material:
$7,000
Glass, wire: $5,000
Utilities: $10,000
Marketing: $10,000
Insurance: $1,000Framing material:
$5,000
Glass, wire: $5,000
Utilities: $5,000
Marketing: $10,000
Insurance: $1,000Framing material:
$7,000
Glass, wire: $7,000
Utilities: $10,000
Marketing: $15,000
Insurance: $2,000Profit before taxes$100,000$100,000$100,000$100,000
Since the four businesses have the same profit before taxes, you decide to choose the business with the highest variable costs. Which business do you choose?
a. Carl’s Framesb. Dee’s Framesc. Bob’s Framesd. Adam’s Frame
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr