Construction Industry Profile

Research and development – totaled $98,280.00 in year 7, and in years 7 to 8 decreased -16.3% or $15,996.00. This is weakness in sales and performance, but a smart decision because of the cut in R&D saved -16.3% or $15,996.00 that would have been looked at as profit. They were able to use the previous year’s investment on R&D.

4. A decrease in the demand for a product or service may result in a decrease in wages for people producing that item.  TRUE

Variable Costs. Overall the company had favorable variances in variable costs, excluding the efficiency variance. As expected, since Competition Bikes sold less than predicted, their related costs: direct materials, direct labor, manufacturing overhead and variable expenses were less than budgeted amounts showing a favorable variance. The labor and overhead revenue and spending variances however, showed unfavorable due to actual output despite the changes to the flexible budget. With the prediction of decreases costs based on sales, these costs should have also decreased. There is no further information on why these rates were high, Competition Bikes will need to look into those expenses.

Lets take a look at the expenses listed under “general and administrative” on the horizontal analysis worksheet. These particular expenses are costs a business incurs when performing normal operations. For years six and seven there was an increase of a little over 20%, or approximately 156 thousand dollars. Then in years seven and eight there was another slight increase. In order to maintain consistent or increased profits without raising prices and/or selling into new markets in order to increase sales figures, a business would have to cut expenses.

Operating expense in general also went down, the total selling expense dropped 14.9%. This is obvious since the sales were down; your expenses are going to also be down or should go down. Sales commissions

However, the uncertainty stemming from these financial aspects of construction should be at least mitigated or ideally eliminated with proper forecasting techniques. During periods of economic expansion, major capital expenditures will raise the costs of construction, and during periods of economic downturn these same costs may decline. In order to control costs, some owners attempt to use fixed price contracts so that the risks of unforeseen contingencies related to an overheated economy are passed on to contractors (PM, 2012). Businesses must factor in that contractors will raise their prices to compensate for the additional risks.

manufacturing. But there is a counterbalance to the drop in total employment, the dramatic rise

Increased fixed cost: the factory was operating at 50 percent of capacity, and none of the individual product lines was pushing its capacity limits

to 2007 its profit margin decreased by $36 million, and its cost of goods sold increased

Change in revenue criteria increased both sales and cost of sales by $ 28 Million. The profit margin was decreased from 1.55% to

Construction wages in the United States are increasing. with wWages are expected to rise 2.4% in 2015. Skilled-trade workers’ wages are rising even more rapidly at 4.6% this year. Unemployment rates in construction are decreasing and the pool of available workers is shrinking., which has resulted in a higher demand for skilled workers from a smaller construction labor force . This has caused is causing a shortage of skilled workers and an upward pressure on wages to increaseincreasing upward pressure on wages. One potential area of relief is the growing movement by state governments to repeal prevailing wage laws. Prevailing wage laws ensure that government contractors pay workers at a pre-determined level based on location and trade. These wages tend to be higher than the market wage and increase labor costs for government contractors. The one relief that many contractors have is the increasing number of states beginning to repeal the prevailing wage laws, which will help stop the increase in construction wages and may even cause a downside wage correction. With construction wages on the rise, state governments repealing prevailing wage laws may take some upward pressure off of construction wages and lower labor costs.

* The selling and administrative expenses accounted 130 thousand euros higher than the projected S&A expenses

Also, the gross profit had a lower increase(+9.67%), that means the cost of sales increased more than the revenue increase in term of percentage. There was a 13.16% rose in net operating expense as both selling and distribution costs and administrative expenses increased. One of the reasons why net operating expense increased because the firm had a programme of reinvesting for organic growth which supply chain, IT and store portfolio had improved. The rose of the net operating expense lead to a 2.13% drop in the operating

There however are challenges in the industry occasioned by uncertainty on future spending on construction projects by the government. Moreover, the cost of doing business and the ability to increasingly make revenue have created a challenging environment for the construction firms. Therefore stakeholders in the construction industry are concerned with whether the government would increase its spending and whether the public construction projects will be available in the future since less than 10 percent are currently financing their clients.

The construction industry much like other industries is dependant with the distribution of “scarce resources” (Drake,1994). Many of its resources known as the factors or production i.e. labour, capital, land etc. are limited (Gregory-Mankiw, 2008), however, wants and desires within the industry are infinite (Myers, 2013). Kishtainy notes that this creates two problems; at any given time, there will be a fixed number of resource, against numerous wants. Sloman 2003 adds that in an effort to rectify this, he argues that we must make choices, in terms of choices within the construction industry Myers suggested that firms need to considered their investments made, how they construct and for whom they construct for.