Eco Week 4 Paper

In: Business and Management

Submitted By vychodniarka
Words 1118
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Thomas Money Revenue, Cost Concepts, and Market Structure Proposal
ECO/561
October 8, 2011
Professor Alfred Igbodipe

Thomas Money Service Inc. (TMS) has been in business since 1940. TMS started out as a consumer finance company granting small loans for household needs. The company expanded over the next five years by issuing business loans, business acquisition financing, and commercial real estate loans. In 1946 management made a decision to expand into equipment financing. This proved very lucrative for the company. With the end of World War II, society experienced increased demand for construction and forestry equipment. In 1951, the equipment financing subsidiary, Future Growth Inc. (FGI) purchased an equipment manufacturing company, which vertically integrated the subsidiaries operations.
Over the next 67 years the company increased revenues and profits. Unfortunately, with the recent downturn in the American economy coupled with several natural disasters, FGI has for the first time experienced a decline in profits and was forced to lay off one-third of its workforce. Although residential home sales have dropped the health care industry is still experiencing healthy demand.
The purpose of this paper is to provide recommendations to TMS for increasing revenue, achieving ideal production levels, determining how fixed and variable costs should be adjusted to maximize products and finally to identify methods to reduce costs.
Since the economic decline FGI has repossessed more than 500 pieces of equipment. FGI has bundled the pieces together and has determined an average price for each piece. The present selling price is $1,732. At that price FGI could sell 182 units for an aggregate purchase price of $315,224. If FGI lowers the price to $1,634.3 they could sell 350 units for an aggregate purchase price of $572,005. Based on the data provided by…...

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