Managing Financial Resources - Research Paper Example

The administration, design, and production budgets should be reviewed so that problems with those could be uncovered and favorable changes could be made. Prices of inputs used for the production process could have increased. New machinery could have been bought for production or design. Sales declined by 15 percent. Normally the Direct costs also should have gone down proportionately. Ideally the direct costs should have come down from 110 million to about 96 million. This indicates that direct costs are not truly apportioned among the products.

A review of the costing method is required to identify any problems with it. Similarly, when sales have gone down by 15 percent, gross profit came down by 27 percent. If profit margin was the same on all products, the gross profit would have come down to a similar extent. This means that a larger percentage of sales were of products that are priced so that the profit margin is low on their sale. Some products might even be prices at a level that causes a loss. The above observation, when seen together with the increase in production overheads confirms the view that the costing of products is not done in a realistic manner.

The deployment of more resources in production resulted in increased production overheads, but it did not result in increased sales. . The above observation, when seen together with the increase in production overheads confirms the view that the costing of products is not done in a realistic manner. The deployment of more resources in production resulted in increased production overheads, but it did not result in increased sales. Increases in the marketing budget also did not increase sales, which could be a result of poor advertising practices.II. Pricing Policies Slingshot follows "cost plus pricing.

" This method adopts an average cost for products and the selling price is arrived by adding a percentage "mark up" (In this case 15 %). This method overlooks the fact that the basic costs of some products are more than those of other products. In fact, the selling price is not directly related to the value addition done in specific products. A more reliable method for pricing is "Absorption Cost Pricing." In this method, direct and indirect cost of each product is scientifically determined and allocated.

Each product sold by a company is given a share of the company's direct and indirect costs and given a separate total cost. A "mark up" is applied to the actual cost as determined for each product. "Cost plus pricing" and "Absorption cost" pricing both do not take into account any "market factors" such as demand and availability. This may not be necessary for this kind of business where market demands remain steady. However. a massive increase in the amount of resources devoted marketing did not seem to bring any results.

This might be a result of limited demand elasticity. It could also be a result of bad marketing. Consumer surveys should be done to analyze consumer demand so that marketing is more effective. The market for Slingshot's products and any companies that compete with