Issue
Peter Brady was the owner of a small manufacturing company, Strand Art Products. Brady wondered if he should accept an offer from a large Canadian retail chain store to produce 2,000 cartons (36,000 mirrors). He was anxious to accept the order but the price offered per carton was less than Strand’s normal selling price, the delivery requirements had to be met, and this order would have a direct impact on Strand’s already strained cash flow.
Teaching Objectives
Students need to perform a financial analysis of a one-time purchase, create a timeline to determine if the order can be completed on time, and use cash budgeting skills to aid in their decision.
Analysis Required
One-time vs. recurring cash flows, return on investment and payback calculations, efficiency trade-offs (cost-benefit analysis).