Other than the shipping cost, Goodwill is also using the software that is being used to provide online information to the channel partners of the company who are the retailers of books. The initial cost of Monsoon software was 13,734 however, the company has estimated that in phase one they will go to reduce their software expenditure up to $7000. This cost reduction will highly support the company’s operations and will ultimately reveal its impact on the total profit of the company. This part of the proposal had been estimated by Nason, the director of the division of donated goods at Goodwill. She is highly concerned about the cost reducing methods that the process will surely reduce the cost and will also contribute positively with its attributes.
The next part of the phase one reveals the selling price of salvage books to be $7.5 at first and this will provide total per book profit of $ 4.62. However, the salvage bookseller sells books for $4 per unit then the total profit obtained by the company would be $4.12 per unit. Goodwill has estimated this reduced cost of books because these are the used books and are present in a very poor condition with damaged pages and book covers.
At first, the accumulated expenditures of Goodwill shown in Exhibit 1 under the heading of year 1 is $331248, and the amount of revenue earned from the sales of books is $256140. This situation is appealing if a company takes some measures to increase its revenues and to reduce its cost that the company bears in the selling and storage of the product. The company can surely increase its profit margin to a certain extent. In phase one, Goodwill has made some forecasted calculation on the basis of which the company would be able to take some initiatives. This scenario states, if the company would sell approximately 6000 books more than it sold previously then it would be possible for the company to make revenues.
The company is selling 40290 books at a selling price of $7.5 per book that makes an aggregate amount of $302175 sales. However, having higher revenues is not enough for the company because if the company is achieving high earnings with higher level of expenditures then it does not make any difference. This is due to the reason that if the company would earn more or less then its net profit will remain the same.
As discussed earlier that cost reduction would be made from the side of the shipment as well as the overall operating cost will also decrease to support the operations. Nason the director of Goodwill’s donations division has planned to review all the costs and has pointed out the fact that instead the theme of not selling the donated books, the company must focus on the loss it is incurring on its unsold items. Monsoon software is proving to be a great technical assistance to the online retailers but incurring a huge cost in the profit statement of the company. Before examining the activities of phase two, Nason has revealed that the company was estimating additional cost of shipping that is instead of assuming $2.99 per unit the company was estimating $3.99 which has increased the shipping cost of the books.
Analysis (Phase two)
In the second phase, the company has not estimated the increased numbers of books sold, however, they have made an action strategy for the movement of worn books. Initially, the process starts with the visual checking of the books acquired through donations. From there the books are sent to the goodwill shop, retail store and to their online outlet, these are the places from where the customer of all kinds can easily buy books of their concern. However, when the books are being sent to the retailer for sales, the retailer then sends the unsold books to the outlet store. From the retail store, the unsold books are moved to the 4-weeks so that the consumer would buy those books from there. However, if the books are not accepted there then the unsold material would be sent back to the outlet store. The outlet store, then finally transfers those books to the Salvage consumer and in case of rejection the unsold books then move to the recycling section.
In the above process, the company was determined to sell a number of unsold books on the basis of visual analysis. The company is not putting efforts to increase the value of the books so that the consumer will be willing to buy those renewed worn books for the purpose of providing indirect donation as well as without ignoring the books being useful for them.............................
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