Merrimack Tractors And Mowers Case Study
Amit Kumar, id 1552
Analysis Report of Merrimack Tractors and Mowers Case Study
Merrimack Tractors and Mowers, Inc. was a major regional manufacturer and seller of large commercial grass mowers based on a design developed by the grandfather of Ricardo Martino.
The company’s major competitors were John Deere, The Toro Company, Simplicity, and
Husqvarna which were much older with extensive lines of lawn care and maintenance equipment. About 25% of the outstanding stock of the company was held by the members of the Martino family and shares were traded on NASDAQ. By 2008, the company was buying all of its tractors and machines manufactured in China to address the cost of manufacturing. The following analysis and answering key questions arising …show more content…
The same effect is counterproductive in 2009, as the prices continue to rise.
What approach (FIFO or LIFO) and why would you recommend to Merrimack Mowers if inventory purchase prices and transportation costs had been stable of falling over the two-year period? (For example, if Merrimack were a computer assembly firm).
Considering available options it can be seen that the business will become unviable right from
2008 onwards. Hence the company should move to FIFO method of accounting for inventory.
This move though has to be supported with an attempt to rein in the prices and cost of goods sold. The switching over to FIFO method can only provide temporary respite and is a measure to run the business in viable status for one more year. Further initiatives to reduce costs must be taken. If a scenario presents where the costs are dropping due to market conditions …show more content…
Is James Colburn suggesting to Rick Martino that they should be managing earnings rather than managing the company and its business? Although such changes are clearly permitted by the law, do you consider them to be ethical?
The decision to manage the earnings for a short term benefit and buying time would be a practical one but it has to be clearly understood that this is just short term and will not help in addressing the real issues the company is facing. The high production cost and inventory holding cost will soon catch up and destroy the shareholder
Analysis Report of Merrimack Tractors and Mowers Case Study
Merrimack Tractors and Mowers, Inc. was a major regional manufacturer and seller of large commercial grass mowers based on a design developed by the grandfather of Ricardo Martino.
The company’s major competitors were John Deere, The Toro Company, Simplicity, and
Husqvarna which were much older with extensive lines of lawn care and maintenance equipment. About 25% of the outstanding stock of the company was held by the members of the Martino family and shares were traded on NASDAQ. By 2008, the company was buying all of its tractors and machines manufactured in China to address the cost of manufacturing. The following analysis and answering key questions arising …show more content…
The same effect is counterproductive in 2009, as the prices continue to rise.
What approach (FIFO or LIFO) and why would you recommend to Merrimack Mowers if inventory purchase prices and transportation costs had been stable of falling over the two-year period? (For example, if Merrimack were a computer assembly firm).
Considering available options it can be seen that the business will become unviable right from
2008 onwards. Hence the company should move to FIFO method of accounting for inventory.
This move though has to be supported with an attempt to rein in the prices and cost of goods sold. The switching over to FIFO method can only provide temporary respite and is a measure to run the business in viable status for one more year. Further initiatives to reduce costs must be taken. If a scenario presents where the costs are dropping due to market conditions …show more content…
Is James Colburn suggesting to Rick Martino that they should be managing earnings rather than managing the company and its business? Although such changes are clearly permitted by the law, do you consider them to be ethical?
The decision to manage the earnings for a short term benefit and buying time would be a practical one but it has to be clearly understood that this is just short term and will not help in addressing the real issues the company is facing. The high production cost and inventory holding cost will soon catch up and destroy the shareholder