Mcphee Distillers Case Study Solution
Suggestions for Improvement
In order to improve the business performance of McPhee Distillers, Kings ley is suggested the following key changes in its business model.
- Production Equipment Replacement: As the production equipment used is antiquated and does not provide the optimal output, therefore, Kings ley should replace this equipment with a new one using its cash resources or by financing through external sources.
- R&D Spending: Kings ley should also focus on introducing Whisky with new flavors by spending a portion of its resources on Research and Development.
- Extending Production Capacity: The production capacity should be increased in order to mitigate the decline in production levels due to increase in the sherry prices during the period of sales growth.
- Sales Growth Strategies: As stated in the previous section, the net loss in the fiscal year 2016 is due to the decline in unit sales, therefore, Kings ley should consider certain sales growth strategies like increasing promotional activities, expanding towards new markets, etc., in order to gain net profits.
Conclusion
The business model adopted by Kings ley is quite profitable as shown in the income statement. However, the company should consider certain improvements like consideration of sales growth strategies, expansion of the current production capacity, etc., to increase its sales and earn net profits without compromising over the quality.
Appendices
Appendix-1: McPhee Income Statement
| McPhee Distillers | |||
| Income Statement | |||
| For the Period ended on Dec 31st 2014, 2015 and 2016 | |||
| Year | |||
| 2014 | 2015 | 2016 | |
| Revenues (w-1) | $ 2,437,500 | $ 2,345,800 | |
| Less: COGS (w-2) | $ (1,687,500) | $ (1,950,000) | |
| Gross Profit | $ 750,000 | $ 395,800 | |
| Less: SG&A Expenses | |||
| Advertising and Promotion | $ (75,000) | $ (76,080) | |
| Lease | $ (60,000) | $ (60,864) | |
| Office and Administrative | $ (15,000) | $ (15,216) | |
| Salaries and Wages | $ (50,000) | $ (50,720) | |
| Repairs and Maintenance | $ (75,000) | $ (76,080) | |
| Supplies | $ (25,000) | $ (25,360) | |
| Utilities | $ (40,000) | $ (40,576) | |
| Warehousing | $ (100,000) | $ (101,440) | |
| Depreciation (Production Equipment) (w-3) | $ (28,571) | $ (28,571) | |
| Local Creative Agency Fees | $ (50,000) | ||
| Total Operating Expenses | $ (518,571) | $ (474,907) | |
| Net Income | $ 231,429 | $ (79,107) | |
Appendix-2: McPhee Balance Sheet
| McPhee Distillers | |||
| Balance Sheet | |||
| For the Period ended on Dec 31st 2014, 2015 and 2016 | |||
| Year | |||
| 2014 | 2015 | 2016 | |
| Assets: | |||
| Current Assets: | |||
| Cash | 250000 | -677500 | 46964 |
| Inventory | 1187500 | 412500 | |
| Total Current Assets | 250000 | 510000 | 459464 |
| Non-Current Assets: | |||
| Production Equipment | 500000 | 500000 | 500000 |
| Less: Accumulated Depreciation | $ (28,571) | $ (57,143) | |
| Production Equipment net | 500000 | 471429 | 442857 |
| Total Non-Current Assets | 500000 | 471429 | 442857 |
| Total Assets | 750000 | 981429 | 902321 |
| Liabilities and Equities: | |||
| Liabilities: | Nil | Nil | Nil |
| Equities: | |||
| Common Stock (250 Shares of 1000 each) | 250000 | 250000 | 250000 |
| Preferred Stock (500 Shares of $1000 each) | 500000 | 500000 | 500000 |
| Add(Less): Net Income(Net Loss) | 231429 | $ (79,107) | |
| Net Worth | 750000 | 981429 | 670893 |
| Total Liabilities and Equities | 750000 | 981429 | 670893 |
Appendix-3: McPhee Cash Flow Statement
| McPhee Distillers | |||
| Cash Flow Statement | |||
| For the Period ended on Dec 31st 2014, 2015 and 2016 | |||
| Year | |||
| 2014 | 2015 | 2016 | |
| Cash Beginning | 250000 | -677500 | |
| Cash Flow From Operating Activities: | |||
| Net Income | 231429 | -79107 | |
| Add: Depreciation Expense | 28571 | 28571 | |
| Add(Less): Change in Inventories | -1187500 | 775000 | |
| Net Cash Flow From Operating Activities | -927500 | 724464 | |
| Cash Flow From Investing Activities: | |||
| Initial Investment | 750000 | ||
| Purchase of Production Equipment | -500000 | ||
| Net Cash Flow From Investing Activities | 250000 | ||
| Cash Flow From Financing Activities | |||
| Nil | Nil | Nil | |
| Cash Balance Ending | 250000 | -677500 | 46964 |
This is just a sample partical work. Please place the order on the website to get your own originally done case solution.
Related Case Solutions & Analyses:
Note on Marketing Strategy
Patagonia Sur: For-Profit Land Conservation in Chile
Mack Henley (D)
Johannes Van Den Bosch Sends an Email
TSA: An Overview, Video Supplement
The High Stakes of Low-Cost Competition
Canon Challenges
Landmark Facility Solutions
Nimble Storage: Scaling Talent Strategy Amidst Hyper- Growth
Asanate Hospital
