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Victoria Income Statement for the Years 2004 -2007 ($000s) | 2004 | 2005 | %Change | 2006 | %Change | 2007 | %Change | Sales | $116,566 | $129,519 | 11.1% | $142,329 | 9.9% | $151,414 | 6.4% | Cost of Sales | 89,755 | 95,994 | 7% | 107,727 | 12.2% | 113,712 | 5.6% | Selling Exp. | 13,851 | 16,402 | 18.4% | 17,155 | 4.6% | 19,656 | 14.6% | Adm. Exp. | 5,800 | 8,235 | 42% | 8,692 | 5.5% | 10,557 | 21.5% | R&D Exp. | 2,533 | 2,748 | 8.5% | 2,923 | 6.4% | 3,163 | 8.2% | Total Cost & Exp. | $111,939 | $123,379 | 10.2% | $136,497 | 10.6% | $147,088 | 7.8% | Gross Income | $4,627 | $6,140 | 32.7% | $5,832 | -5% | $4,326 | -25.8% | Income Taxes | 1,921 | 2,445 | 27.3% | 2,257 | -7.7% | 1,881 | -16.7% | Net Income | $2,706 | $3,695 | 36.5% | $3,575 | -3.2% | $2,445 | -31.6% |

Main Issues:
Over decentralization gives rise to an employee population, increases the administrative expenses, and there is a lack of coordination and motivation among subdivisions. It leads to poor allocation of costs, trouble with internal trade pricing and in the case of R&D focusing on useless projects. In addition, there is a lack of leadership among subdivisions due to Walters is planning to retire.
Cost of good sold is related high due to much of the equipment in the Squamish plant was very old, by 2007, only 15% of the machinery in the plant was new, efficient, numerically controlled equipment.
Alternative
1. Focus on single line productions, reduce operating cost and re-structure company by centralization
Pro: 1. Continue and enhance cost leadership strategy by decreasing product cost and operating more efficient 2. Quality and reliance will also be improved by replacing aging equipments 3. Centralization structure can enforce product line focus and improve communication among divisions. In addition, it will make incentive

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