Pepe Jeans Case Study

Pepe Jeans Case Study Question 1 Flexible administration would give to an rack upition in the sales of about 10%. accredited sales - £ 200M 10% of £ 200M would be £ 20M Profit in the first regularize taxes(PBT) at the rate of 32 % would implicate an increment in the PBT of £ 6 400 000 ( 32% x £ 20 000 000) prime(prenominal) resource Decrease of lead cartridge holder would lead to an increase in constitutes by 30%. Currently the yearly hail of sales is 40% of sales of £ 200 000 000 that is £ 80<( 40%x £ 200M) If the greet goes up by 30% it would immoral 30% of £ 80M that is £ 24M In return for this increase in cost the company could make an approximate increase in the PBT of £ 6 400 000 that would still mean (24 M 6.4M) = £ 17.6M additional check mark on the company. The advantage in this utility(a) is that the company does not have to make any initial enthronement entirely has to flummox this additional burden e very year. Since no enthronement is do , no payback period is calculated. Second secondary sign obdurate cost for equipment £ 1 M Renovations £ three hundred 000 add up £ 1.

3M Operations cost £ 500 000 Lead time 6 weeks 40%x £ 200M= £ 80M yearly cost of sales at 40% 6/52 X £ 80M = £ 9 230 000 gunstock carrying cost is 30% of £ 9 230 000 that is £ 2 769 000(30%x £ 9 230 000) Recurring cost= inventory carrying cost+ trading operations costs= £ 2 769 000 + £ 500 000= 3 269 000 Second election £ 6 400 000 £ 3 270 000= £ 3 130 000 we draw off an increase in the yearly profit before taxes Now, the fixed investment made by the company i s £ 1 300 000 (calculated above) so the p! ayback period is (1.3/3.13) x 52 = 21.6 weeks . This is the prefer alternative and should be recommended to Pepe. Question 2 Other alternatives The new(prenominal) alternative that Pepe could pass could be to continue with the current arrangement. It is superior from the financial full stop of view but it is insecure from the marketing point of view. If Pepe continues to put forward on requirements to place firm line of battles...If you want to get a full essay, order it on our website: OrderEssay.net

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