Roxbury Manufacturing Company is a privately owned business

Roxbury Manufacturing Company is a privately owned business

CASE 2Roxbury Manufacturing Company is a privately owned business. Products manufactured by Roxburyhad been doing very well until the year 2011. Last two years have seen a steady decline in sales andprofit. If this declining trend continues, the company might come under financial distress. Incomestatements for the last two years are given below.Year 1SalesLess Variable ExpensesTotal Contribution MarginLess Fixed ExpensesNet Income before taxesPercentYear 2Percent$ 4,000,000100$ 3,600,000100$ 3,000,00075$ 2,700,00075——————————————————————-$ 1,000,00025$ 900,00025$ 500,000$ 500,000——————————————————————–$ 500,000$ 400,000==========================================Mr. Creighton, the owner of the company is baffled that only a ten percent decline in sales hasresulted in a twenty percent decline in profits. He asks you to explain to him how in spite ofmaintaining efficiency in operations by keeping variable expenses and contribution margin at the samepercentage level, he has experienced a greater percentage decline in profits.


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