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MacLeish Nurseries wholesales non-seasonal plants. Sales for the previous three quarters ending September 31, 2004, were poor because of the cold spring and summer. The
MacLeish Nurseries wholesales non-seasonal plants. Sales for the previous three quarters ending September 31, 2004, were poor because of the cold spring and summer. The plants could be sold at two times cost to other wholesalers, but the company had 3.5 million plants that it could not sell in the following quarter. Also, the firm's banker is asking for its loan to be paid down to below $500,000 and the manager, Kathleen Biro, is worried about whether she will receive her new share options, which will be released if revenue meets or exceeds this year's budget of $18 million. For some time the company's owners have been considering selling the business; they are now very interested in improving profits in order to enhance the sales price. Below is the 2004 financial statement for MacLeish for the first three quarters ($000s). Sales in the fourth quarter are normally equal to sales in the third quarter, and all indications are that this will be the case for this year as well. The company has noticed that its results depend heavily on two factors: advertising and price. Over time, it has noticed that any change in advertising from seasonal levels results in a 2.5-to-l change in sales. In other words, a $1 change in advertising results in a $2.50 change in sales from otherwise normal seasonal levels. In terms of pricing, a 2 percent decrease in the retail price of plants results in a 4 percent increase in sales volume. Similarly, a 2 percent increase in the price results in a 4 percent decrease in sales volume. Write a report recommending a course of action for MacLeish Nurseries. MacLeish Nurseries wholesales non-seasonal plants. Sales for the previous three quarters ending September 31, 2004, were poor because of the cold spring and summer. The plants could be sold at two times cost to other wholesalers, but the company had 3.5 million plants that it could not sell in the following quarter. Also, the firm's banker is asking for its loan to be paid down to below $500,000 and the manager, Kathleen Biro, is worried about whether she will receive her new share options, which will be released if revenue meets or exceeds this year's budget of $18 million. For some time the company's owners have been considering selling the business; they are now very interested in improving profits in order to enhance the sales price. Below is the 2004 financial statement for MacLeish for the first three quarters ($000s). Sales in the fourth quarter are normally equal to sales in the third quarter, and all indications are that this will be the case for this year as well. The company has noticed that its results depend heavily on two factors: advertising and price. Over time, it has noticed that any change in advertising from seasonal levels results in a 2.5-to-l change in sales. In other words, a $1 change in advertising results in a $2.50 change in sales from otherwise normal seasonal levels. In terms of pricing, a 2 percent decrease in the retail price of plants results in a 4 percent increase in sales volume. Similarly, a 2 percent increase in the price results in a 4 percent decrease in sales volume. Write a report recommending a course of action for MacLeish Nurseries
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