Wayne Swisher Mower Case Study
Wayne Swisher, President and Chief Executive Office of Swisher Mower and Machine Company (SMC), was weighing the proposal of a private branding arrangement for SMC’s line of riding mowers. He thought the inquiry presented an opportunity but details should be studied more closely.
Situation Analysis:
Company Background:
Established in 1945 by Max Swisher, SMC grew steadily with unit volume for SMC riding mowers peaking at 10,000 units with sales of $2 million in 1966. In the 1990s, the unit volume remained constant with around 4,250 riding mowers per year. Compared with 1,263,000 unit sales in riding mowers and tractors industry, SMC only occupied around 0.3% market share. Max Swisher, the current CEO, thought maintaining a small company image …show more content…
Hence, gross profit of the proposal would be slightly higher.
Hence, the proposal would bring an additional per unit income of $42.25 (gross profit of 6.5%) if within the 10,000 capacity with a single 40-hour-per-week shift and an additional income of $16.25 (i.e. GP of 2.5%) if over capacity with overtime work.
Capacity Analysis (Table C)
Assume SMC could manage to arrange a smooth production without significant fluctuation to counter the seasonal delivery. Hence, production volume could be consistent with sales volume as shown in Table A. Hence, in 1996, as total production volume still under capacity, no overtime work for PL needed. While for both 1997 and 1998, 2,100 units of PL would be produced with overtime work.
Incremental Income (Table D)
Based on the assumption and calculation above, total incremental income can be derived as follows. The proposal would generate an extra net profit before tax for SMC of $11,098, $88,850 and $88,850 in year 1996, 1997 and 1998 respectively. On the base of year 1995, the sharp increase in sales by 178% would bring in a 21% increase in net profit before tax.
Table D
Ride King 1996 1997
Situation Analysis:
Company Background:
Established in 1945 by Max Swisher, SMC grew steadily with unit volume for SMC riding mowers peaking at 10,000 units with sales of $2 million in 1966. In the 1990s, the unit volume remained constant with around 4,250 riding mowers per year. Compared with 1,263,000 unit sales in riding mowers and tractors industry, SMC only occupied around 0.3% market share. Max Swisher, the current CEO, thought maintaining a small company image …show more content…
Hence, gross profit of the proposal would be slightly higher.
Hence, the proposal would bring an additional per unit income of $42.25 (gross profit of 6.5%) if within the 10,000 capacity with a single 40-hour-per-week shift and an additional income of $16.25 (i.e. GP of 2.5%) if over capacity with overtime work.
Capacity Analysis (Table C)
Assume SMC could manage to arrange a smooth production without significant fluctuation to counter the seasonal delivery. Hence, production volume could be consistent with sales volume as shown in Table A. Hence, in 1996, as total production volume still under capacity, no overtime work for PL needed. While for both 1997 and 1998, 2,100 units of PL would be produced with overtime work.
Incremental Income (Table D)
Based on the assumption and calculation above, total incremental income can be derived as follows. The proposal would generate an extra net profit before tax for SMC of $11,098, $88,850 and $88,850 in year 1996, 1997 and 1998 respectively. On the base of year 1995, the sharp increase in sales by 178% would bring in a 21% increase in net profit before tax.
Table D
Ride King 1996 1997