Luxor Cosmetics
“Case Analysis of Luxor Cosmetic”
REGIS UNIVERSITY
Date: March 25th, 2013
Week-4 assignment
MSAA 609: Cost Management
Executive Summary
An effective business strategy and budgeting is very essential in a manufacturing industry. A company without a proper business strategy and master budgeting plan would usually faces tremendous challenges and losses during its business operations. The importance of company’s business strategies and budgeting plans, as well as the challenges and losses in the absence of these items has clearly presented in this case study. (“Wiley,” 2013)
Luxor Cosmetics is a cosmetic company which manufactures variety of lipstick, nail polish, and cosmetic cream for women. The company was founded by Mr. Phil Luxton in 90’s. And five years after its establishment, due to lack of capital for investment the 40% of company’s stakes was publicly traded to generate more capital for the company. The firm did very well for the first half of the decade; the firm was constantly maintaining margins of 100% over its variable manufacturing cost. The firm was doing so well that it never saw a need for a sophisticated accounting system. However, when its profits started to fall, it couldn’t compare its operations with the rest of the industry. Even worse, it had never hired a professional marketing staff, so it couldn’t even analyze what was going wrong with its sales. But, its competitors were still enjoying sales growth, while the Luxor Cosmetic is suffering. After worse thing start happening, the company chairman, Mr. Luxton finally realized that the company need somebody who can resolved these problems. But, it was so critical for the new guy, who was hired as CFO to resolve the problems. (Hopkins, 2009)
From all the scenarios presented in the case study, it’s appears very clear that the Luxor Cosmetics is in a difficult situation in which changes need to be made. There are various items that need
REGIS UNIVERSITY
Date: March 25th, 2013
Week-4 assignment
MSAA 609: Cost Management
Executive Summary
An effective business strategy and budgeting is very essential in a manufacturing industry. A company without a proper business strategy and master budgeting plan would usually faces tremendous challenges and losses during its business operations. The importance of company’s business strategies and budgeting plans, as well as the challenges and losses in the absence of these items has clearly presented in this case study. (“Wiley,” 2013)
Luxor Cosmetics is a cosmetic company which manufactures variety of lipstick, nail polish, and cosmetic cream for women. The company was founded by Mr. Phil Luxton in 90’s. And five years after its establishment, due to lack of capital for investment the 40% of company’s stakes was publicly traded to generate more capital for the company. The firm did very well for the first half of the decade; the firm was constantly maintaining margins of 100% over its variable manufacturing cost. The firm was doing so well that it never saw a need for a sophisticated accounting system. However, when its profits started to fall, it couldn’t compare its operations with the rest of the industry. Even worse, it had never hired a professional marketing staff, so it couldn’t even analyze what was going wrong with its sales. But, its competitors were still enjoying sales growth, while the Luxor Cosmetic is suffering. After worse thing start happening, the company chairman, Mr. Luxton finally realized that the company need somebody who can resolved these problems. But, it was so critical for the new guy, who was hired as CFO to resolve the problems. (Hopkins, 2009)
From all the scenarios presented in the case study, it’s appears very clear that the Luxor Cosmetics is in a difficult situation in which changes need to be made. There are various items that need
References: Blocher E., Stout D., Juras P., Cokins G. (2013). Strategy and Master Budget. Cost Management. (6th ed., pp. 350-406). New york: The McGraw-Hill Companies. DOI:www.mhhe.com/blocher6e Hopkins L. (June, 2009). IMA Educational Case Study Journal. Luxor Cosmetics. (Vol. 2, No. 2, Art. 1). IMA. Wiley, C. (March 22nd, 2013). What is the difference between a strategic plan and a budget?. Retrieved from: http://smallbusiness.chron.com/difference-between-strategic-plan-budget-22969.html Yager, F. (2011, October 11). Costs of hiring the wrong person go beyond the financial. Retrieved fromhttp://news.efinancialcareers.com/22144/costs-of-hiring-the-wrong-person-go-beyond-the-financial/ Enotes. Budgets and budgeting. (March 22nd, 2013). Retrieved from: http://www.enotes.com/budgeting-reference/budgets-budgeting-178308