uke ssays.co m

http://www.ukessays.co m/essays/finance/berkshire-threaded-fasteners-co mpany-finance-essay.php

Berkshire Threaded Fasteners Company Finance Essay
In July 2000, one of the Berkshire T hreaded Fasteners Company’s competitors Bosworth announced a price reduction on the 100 series f rom $2.45 to $2.25 per 100 pieces. As the prof it and loss by Product f rom January 1 to June 30, 2000, the reduction of the unit sales price of Series100 f rom $2.45 to $2.25 would mean that the unit sales price would be below the total unit cost of $2.29.T his should mean substantial losses to the bottom line. However, Cook f orecast that if they hold the price at $2.45 price during the last six months of 2000, unit sales would be 750,000 100-piece lots, the revenue would be $1,838,000 ($2.45* 750,000= $1,837,500). Cook f elt that if the price were dropped to $2.25 per 100 prices, the six months’ volume would be 1,000,000, the revenue would be $2,250,000 ($$2.25* 1,000,000= $2,250,000). Based on this, in last six months of 2000 they would sell more of their 100 series than any of the other series. In addition, f rom Appendix 2 we can see if the price of the 100 series reduced f rom $2.45 to $2.25 in 2000, the selling price will be reduced f rom $2.42 to $2.22, so the incremental prof it should be 90,000. Appendix 2 shows that reduction in unit sales price to $2.22 will indeed create break-even production quantity of near one million units as projected. T his reduction would not increase operating income, the overall total f or the year would at $90,000. In my opinion, they can reduce the price of the 100 series f rom $2.45 to $2.25. Above all Bosworth has already have the price cut on this series and to be competitive in the market, Berkshire’s share of industry sales was 12% f or the 100 series, it is the most product in all series, so Berkshire should reduce the