# Superior Metals Corporation (Smc) Business Memorandum

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Superior Metals Corporation (SMC) Business Memorandum The objective of Decision Model One of the most significant part of a company is its Net Income. Developing a decision model to see and analyze how product cost and sales impact the company’s profit can benefit company to maximize its profit and achieve long term sustainable business development. Going over this assignment, I better understand the relationship between product costs and company’s net income, as well as develop my excel spreadsheet skills and improve my ability to analyze numbers from the model. Analysis of SMC’s decision model Cost of goods manufactured indicates product costs for a period of time. This amount is transferred to finished goods inventory and is used to calculate cost of good sold. From the schedule of cost of goods manufactured, I can tell the cost structure of SMC mainly include direct material, direct labor, and manufacturing overhead. Adding or reducing any product mix will eventually impact the cost of goods manufactured. For example, when we reduce labor cost of \$40,000, the cost of goods manufactured is reduced to \$1,289,375 compared to the original data of \$1,329,375. The schedule of cost of goods sold shows the cost of goods manufactured will positively affect the number cost of goods sold, reducing \$40,000 labor cost eventually save \$40,000 of cost of goods sold. In the income statement, we found net income is significantly affected by product sales and cost. When sales and other expenses stay the same as and cost of goods sold are reduced \$40,000, net income increases from \$30,750 to \$55,490. In addition, we can also estimate the future expected net income for a company by calculating current actual income and probability of sales revenue increase or decrease percentage. Higher probability with a positive percentage of sales revenue will result a higher expected