Master Decker: Expansion Opportunities
(4 pages of text)
In May 2017, the owner and operator of Master Decker, a deck restoration business, had an opportunity to expand his business by adding to the company’s current service offerings. His three expansion alternatives were offering deck building, marketing an exclusive line of stains, and manufacturing deck cleaning chemicals. He planned to analyze the costs and benefits of each alternative. He wanted to continue growing the business but wondered which of these options, or combination of options, would provide the best return on investment for his company. Because he had no set timeline, he wanted to move forward with at least one of the options immediately.
This case best serves as an introduction to future-oriented decision making and is appropriate for an introductory management accounting course the undergraduate level. At the completion of this case, students will be able to
- establish which cash flows are relevant (cash, future, and different) for this company’s decision;
- perform a qualitative analysis for the alternatives available to the business;
- identify and organize all relevant costs;
- determine the working capital differential investments;
- calculate the payback period and return on investment for each alternative; and
- make sound recommendations for the company, providing justification for the best alternative.
Canada, Small, 2017
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