Daisy Manufacturers, Inc., produces and sells five products. Sales efforts encompass a ten-state area. The company is medium sized in relation to other companies in the industry. During the past four years, competition from foreign companies has increased. The company employs approximately five hundred people and has thirty-two departments and sales districts. During the past three years, the company has experienced a gradual, but significant, drop in profit. The company does not have a “profit planning and control program,” although, as the executive vice-president stated: “We do an awful lot of planning and controlling.”
Recently, the president sent a memorandum to all department and district managers that included the following directive: “Each department is expected to implement a 10 percent across-the-broad cut, based on last year’s result, in total expenses during the coming year. The quarterly financial statements will be evaluated to ascertain the effectiveness with which this directive is implemented.” Required:
1.Assuming some expenses were in fact too high, give some suggestions as to a general approach to increase profit.