Aurora Textile Company Essay Example | Topics and Well Written Essays - 250 words

Aurora Textile Company - Essay Example The operating profit in 2002 was $445 which is relatively low compared to $6,234 in 2001 and $4,109 in 2000. The company’s sales are affected by stiff competition from cheap imported yarns from Asia industries that flooded the U.S market. In addition, the profit margins are affected by the liability related to customer returns. The customer returns saw the textile company loose between 5 to 7.5 times more on revenue in reimbursements (Bruner et al. 314). In order for Aurora Textile Company to survive in the competitive market, there is a need to modernize their operations and cut costs (Bruner et al. 313). The proposal by to invest in a new machine Zinser 351 will improve the company’s performance and help to reduce the production expenses. The machine would reduce maintenance and power costs amounting to $0.03/lb, and customer returns equal to $0.077/lb based on conversion costs for 2002 (Bruner et al. 316). The purchase of Zinser 351 reduces the rate of customer returns that is critical during the period the WTO lifted the ban on quotas in January 2005. When the company makes more money, then it will attract more investments by the shareholders that will help Aurora Textile industry to operate and survive in the competitive