July 26, 2015
600 S Clyde Morris Blvd
Daytona Beach, FL. 32114
Attn: Blue Jay Aviation
Dear Mrs. McKeemon and Mr. Castanada, after reviewing the financial situation of Blue Jay Aviation, and analyzing the scenarios explained by your company, we at Mendez Keeler & Gayle Consulting have come suggestions in order to optimize your company’s performance.
Our first suggestion is about the offer Blue Jay aviation received about taking over the gift shop at the airport; we strongly suggest you to accept the offer, but to negotiate some terms, since you have access to the airport manager. According to our calculations, based on the financial statement of 2010, if the airport can lower the rent in 20%, the gift shop would have been profitable that year, gaining $13,700 instead of losing $1,750. We would also suggest you to lower the gift shop’s salaries and wages expense; a 10% reduction in this item would represent a profit of $8,000, which could be accomplished by reducing personnel or lowering wages. Adding both savings would mean a total profit of $21,700. A final observation about the gift shop would be the consideration of raising prices 5%. If the same sales that took place on 2010 would repeat this year, with the same cost of goods sold, rising prices 5% would mean $22,500 of profit. Our three suggestions would mean a total profit of $44,200 if the sales maintain the same volume as 2010, but historically the gift shop has increased sales every year, meaning that the potential gains would be even higher.
Should you decide to follow our advice and take over the gift shop, we would like to recommend an inventory control, reviewing the items that are selling the most and those that have been sitting in the store for too long. Items with more than one year in inventory should be offered at a discounted price in an attempt to sell them quick and avoiding buying those items in the future. The reason for this is that inventory sitting in the...