Haverwood Furniture Case Study
2007 pre-tax profit was $3.7 million on $75 million in sales. The company’s forecast of a 4% increase in 2008 sales is in line with expectations for the furniture industry as a whole. The president of the company expects increasing costs to reduce the contribution margin to 20%. He would like to attain a 5% pre-tax profit margin which would be a slight increase from the current 4.9%.
Company policy limits promotional expenditures to 5% of sales. In 2007, 4.9% of total sales were spent on promotional costs including sales and sale administration