ACTIVITY
Your
group has been hired as a team of consultants on a multi
–
year basis for a global washer and
dryer manufacturer. They currently offer two core washer and dryer sets: a high
–
end model and
an economic model. You are tasked to complete several calculations an
d presen
t
your findings to
the
company stakeholders.
For your first assignment, management has provided the following revenue and cost information:
High
–
End Set
Economical Set
Sales price
$3,500
per unit
$1,000
per unit
Labor
$875
per unit
$250
per unit
Materials
$1400
per unit
$300
per unit
Direct fixed costs
$25,000
per month
$16,500
per month
Allocated fixed costs
$85,000
per month
$85,000
per month
They want a better understanding of
their business to make budgeting and sales goals decisions
and have asked you to determine their:
1.
Break
–
even quantities for each product line
2.
Break-
even quantities to earn $500,000 per year margin on the high
–
end line (at the
current sales price)
3.
Break-
even quantities to earn $300,000 per year margin on the economical line (at
the current sales price)
They expect the product lines to fully absorb the costs allocated to them.
A.
Once you have determined these amounts, they have asked that you:
·
Presen
t the
information using this
tabular
format
Description
title 1
title 2
title 3
· Using the table to present information does not take the place of text analyses
· Describe how you performed your calculations
· And explain what the results mean
B. Must use Microsoft PowerPoint presentation software and your
Completed presentation should consist of 3-4 slides, References page must be separate from the 4 slides.
· The slides should contain all the information necessary to answer the question(s) without overloading the slides. Please summarize the information into bullet points. Please do not overload your slides with too much text and small fonts. Make sure your presentation is visible to people “sitting in the back of the room”.
· All
APA guidelines
must be followed including proper
paraphrasing
,
in-text citations
, and
references
.
Superior presentations will:
· Describe the circumstances.
· Perform all calculations correctly.
· Articulate how the calculations were performed.
· Evaluate the computations and explain their meanings.
· Make recommendations, supported by well-thought-out rationale and considering various factors that could impact the recommendations.
ACTIVITY
Your
group has been hired as a team of consultants on a multi
–
year basis for a global washer and
dryer manufacturer. They currently offer two core washer and dryer sets: a high
–
end model and
an economic model. You are tasked to complete several calculations an
d present your findings to
the company stakeholders.
For your first assignment, management has provided the following revenue and cost information:
High
–
End Set
Economical Set
Sales price
$3,500
per unit
$1,000
per unit
Labor
$875
per unit
$250
per unit
Materials
$1400
per unit
$300
per unit
Direct fixed costs
$25,000
per month
$16,500
per month
Allocated fixed costs
$85,000
per month
$85,000
per month
They want a better understanding of
their business to make budgeting and sales goals decisions
and have asked you to determine their:
1.
Break
–
even quantities for each product line
2.
Break
–
even quantities to earn $500,000 per year margin on the high
–
end line (at the
current sales price)
3.
Break
–
even quantities to earn $300,000 per year margin on the economical line (at
the current sales price)
They expect the product lines to fully absorb the costs allocated to them.
A.
Once you have determined these amounts, they have asked that you:
·
Presen
t
the
information using this
tabular
format
Description
title 1
title 2
title 3
ACTIVITY
Your group has been hired as a team of consultants on a multi-year basis for a global washer and
dryer manufacturer. They currently offer two core washer and dryer sets: a high-end model and
an economic model. You are tasked to complete several calculations and present your findings to
the company stakeholders.
For your first assignment, management has provided the following revenue and cost information:
High-End Set Economical Set
Sales price
$3,500 per unit $1,000 per unit
Labor $875 per unit $250 per unit
Materials $1400 per unit $300 per unit
Direct fixed costs $25,000 per month $16,500 per month
Allocated fixed costs $85,000 per month $85,000 per month
They want a better understanding of their business to make budgeting and sales goals decisions
and have asked you to determine their:
1. Break-even quantities for each product line
2. Break-even quantities to earn $500,000 per year margin on the high-end line (at the
current sales price)
3. Break-even quantities to earn $300,000 per year margin on the economical line (at
the current sales price)
They expect the product lines to fully absorb the costs allocated to them.
A. Once you have determined these amounts, they have asked that you:
Present the information using this tabular format
Description title 1 title 2 title 3
Running Head: MANAGERIAL ACCOUNTING 1
MANAGERIAL ACCOUNTING 3
Cost Volume Calculation: Breakeven Point
Student Name
Institutional Affiliation
Cost Volume Calculation: Breakeven Point
1. Break-even quantities for each product line
a. The breakeven quantity for
High end set
:
= (
$25000
+$85000)/$1225
=
90
units
b. The breakeven For the economical set:
= (
$16500
+$85000)/$450
=
226
units
2. Break-even quantities to earn $500,000 per year margin on the high-end line (at the current sales price)
To earn $500000 per year margin on the high end line:
= ($25000+$85000+$500000)/$1225
= 498 units
3. Break-even quantities to earn $300,000 per year margin on the economical line (at the current sales price)
To earn $ 300000 per year margin on the economical line:
= ($16500+$85000+$300000)/$450
= 893 units
Present the information using this tabular format
Description |
Fixed/variable cost |
Unit for Break-even point |
Sale price/ unit |
High end set | $25000 | 90 |
$1,004.1 |
Economical set |
$16500 | 226 |
$335.6 |
Describe how you performed your calculations
To calculate the break even quantity for a high end set, direct fixed costs for a high end set ($25000) is added with the allocated fixed costs of a high end set ($85000). The sum is divided by subtracting the sales price ($3500) by the summation of labor ($875) and materials ($1400)
To calculate the break even quantity for the economical set, direct fixed costs are added with the allocated fixed costs of the economical set(Gorham, 1970).). The summation is then divided by the subtraction of the sales price (1000) by the addition of labor and materials of the economic set.
To calculate the Break-even quantities to earn $500,000 per year margin on the high-end line (at the current sales price), the direct fixed cost and the allocated fixed costs of a high end set are added together with the $500000 per year margin (Kong & Wu, 2009). The sum is divided by subtracting the sales price ($3500) by the summation of labor ($875) and materials ($1400
To calculate the Break-even quantities to earn $300,000 per year margin on the economical line (at the current sales price) the direct fixed cost and the allocated fixed costs of the economical line are added together with the $300000 per year margin. The summation is then divided by the subtraction of the sales price (1000) by the addition of labor and materials of the economic set (Wallington, Barnden, Glasbey & Lee, 2006).
Explain what the results mean
From the Break-even quantities to earn $500,000 per year margin on the high-end line, the company must sell 498 units to cover their fixed expenses.
From the break even quantities, to earn $300000 per year margin on the economic set, 893 units need to be sold to cover the variable costs (Ross, Dalsace, & Anderson, 2005).
References
Gorham, T. (1970). Determining Economic Purchase quantities for parts with price breaks. PIM, 11, 36-42.
Kong, J., & Wu, Y. (2009). On economical set representations of graphs.
Ross Jr, W. T., Dalsace, F., & Anderson, E. (2005). Should you set up your own sales force or should you outsource it? Pitfalls in the standard analysis. Business Horizons, 48(1), 23-36.
Wallington, A. M., Barnden, J. A., Glasbey, S. R., & Lee, M. G. (2006). Metaphorical reasoning with an economical set of mappings. DELTA: Documentação de Estudos em Lingüística Teórica e Aplicada, 22(SPE), 147-171.
Running
Head:
MANAGERIAL ACCOUNTING
1
Cost Volume Calculation: Breakeven Point
Student Name
Institutional Affiliation
Running Head: MANAGERIAL ACCOUNTING 1
Cost Volume Calculation: Breakeven Point
Student Name
Institutional Affiliation
Please describe the circumstances of the following case study and recommend a course of action. Explain your approach to the problem, perform relevant calculations and analysis, and formulate a recommendation. Ensure your work and recommendation are thoroughly supported.
Case Study:
A manufacturing company is evaluating two options for new equipment to introduce a new product to its suite of goods. The details for each option are provided below:
Option 1
· $65,000 for equipment with useful life of 7 years and no salvage value.
· Maintenance costs are expected to be $2,700 per year and increase by 3% in Year 6 and remain at that rate.
· Materials in Year 1 are estimated to be $15,000 but remain constant at $10,000 per year for the remaining years.
· Labor is estimated to start at $70,000 in Year 1, increasing by 3% each year after.
Revenues are estimated to be:
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Year 6 |
Year 7 |
|||||||
– |
75,000 |
100,000 |
125,000 |
150,000 |
Option 2
· $85,000 for equipment with useful life of 7 years and a $13,000 salvage value
· Maintenance costs are expected to be $3,500 per year and increase by 3% in Year 6 and remain at that rate.
· Materials in Year 1 are estimated to be $20,000 but remain constant at $15,000 per year for the remaining years.
· Labor is estimated to start at $60,000 in Year 1, increasing by 3% each year after.
Revenues are estimated to be:
80,000 |
95,000 |
130,000 |
140,000 |
160,000 |
The company’s required rate of return and cost of capital is 8%.
Management has turned to its finance and accounting department to perform analyses and make a recommendation on which option to choose. They have requested that the four main capital budgeting calculations be done: NPV, IRR, Payback Period, and ARR for each option.
For this assignment, compute all required amounts and explain how the computations were performed. Evaluate the results for each option and explain what the results mean. Based on your analysis, recommend which option the company should pursue.
Superior papers will:
· Perform all calculations correctly.
· Articulate how the calculations were performed, including from where values used in the calculations were obtained.
· Evaluate the results computed and explain the meaning of the results, including why certain measurements are more accurate than others.
· Recommend which option to pursue, supported by well-thought-out rationale, and considering any other factors that could impact the recommendation.
Be sure to use APA formatting in your paper.
Please des
cribe the circumstances of the following case study and recommend a
course of action. Explain your approach to the problem, perform relevant
calculations and analysis, and formulate a recommendation. Ensure your work and
recommendation are thoroughly suppo
rted.
Case Study:
A manufacturing company is evaluating two options for new equipment to
introduce a new product to its suite of goods. The details for each option are
provided below:
Option 1
·
$65,000 for equipment with useful life of 7 years and no salvage value.
·
Maintenance costs are expected to be $2,700 per year and increase by 3% in
Year 6 and remain at that rate.
·
Materials in Year 1 are estimated to be $15,000 but remain constant
at $10,000
per year for the remaining years.
·
Labor is estimated to start at $70,000 in Year 1, increasing by 3% each year
after.
Revenues are estimated to be:
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
–
75,000
100,000
125,000
150,000
150,000
150,000
Option 2
·
$85,000 for equipment with useful life of 7 years and a $13,000 salvage value
·
Maintenance costs are expected to be $3,500 per year and increase by 3% in
Year 6 and remain at that rate.
·
Materials in Year 1 are estimated to be $20,000 but remain constant at $15,000
per year for the remaining years.
·
Labor is estimated to start at $60,000 in Year 1, increasing by 3% each year
after.
Revenues are estimated to be:
Please describe the circumstances of the following case study and recommend a
course of action. Explain your approach to the problem, perform relevant
calculations and analysis, and formulate a recommendation. Ensure your work and
recommendation are thoroughly supported.
Case Study:
A manufacturing company is evaluating two options for new equipment to
introduce a new product to its suite of goods. The details for each option are
provided below:
Option 1
$65,000 for equipment with useful life of 7 years and no salvage value.
Maintenance costs are expected to be $2,700 per year and increase by 3% in
Year 6 and remain at that rate.
Materials in Year 1 are estimated to be $15,000 but remain constant at $10,000
per year for the remaining years.
Labor is estimated to start at $70,000 in Year 1, increasing by 3% each year
after.
Revenues are estimated to be:
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
– 75,000 100,000 125,000 150,000 150,000 150,000
Option 2
$85,000 for equipment with useful life of 7 years and a $13,000 salvage value
Maintenance costs are expected to be $3,500 per year and increase by 3% in
Year 6 and remain at that rate.
Materials in Year 1 are estimated to be $20,000 but remain constant at $15,000
per year for the remaining years.
Labor is estimated to start at $60,000 in Year 1, increasing by 3% each year
after.
Revenues are estimated to be: