Essay Luxor Cosmetics

1671 Words Sep 7th, 2013 7 Pages
“Case Analysis of Luxor Cosmetic”


Date: March 25th, 2013
Week-4 assignment
MSAA 609: Cost Management

Executive Summary
An effective business strategy and budgeting is very essential in a manufacturing industry. A company without a proper business strategy and master budgeting plan would usually faces tremendous challenges and losses during its business operations. The importance of company’s business strategies and budgeting plans, as well as the challenges and losses in the absence of these items has clearly presented in this case study. (“Wiley,” 2013)
Luxor Cosmetics is a cosmetic company which manufactures variety of lipstick, nail polish, and cosmetic cream
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Other important changes or strategies that should be considered by Luxor Cosmetics is to try to get rid of the old merchandise by creating an online discount web page, in which last year’s products can be sold at a lower price, targeting different costumers with different needs and incomes. This will not just help the company in increasing its cash flow but would also help to decrease the overstocked inventories.
There is also great need of increase in Luxor’s sales volume for its future existence. For instance, the loan figures of the company in the past four years from 2007 to 2010 shows that it is constant for the last two years. In the projected financial statements and the cash flow for 2011, it is estimated that the company would be able to repay the bank loan to the tune of $10 million. The rate of interest on loan is 7%. This means that there will be savings of $0.7 million which is exactly the same amount of the net loss for the year 2011. But the profitability is not only dependent on interest cost reduction. The company is experiencing a trend of reducing sales and this might not be sufficient enough to decrease the future probable losses in the year 2012, unless there is increase in sales volume. (Hopkins, 2009)
Some of the

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