Abstract
Break even analysis is a method that has been applied by many business operations in determining the least operational points which they can operate and still remain in business. It is very important for a business that has just entered the market and wants to win its market share before it can set the selling prices for its prices. It is also applicable in events where here are a number of competitors a firm wants to win. Break even point is defined as the point below which a business cannot operate. At this point, the business should be able to cover all its costs, which are fixed and variable costs. It is measured in either product units or dollars.

Bill French, Accountant
The break even analysis is a very important tool to help any firm in deciding on the best operational volume. It requires three types of costs namely the fixed cost, variable cost and selling price (Dayananda, et al, 2002). As Bill French puts it, “the level of operation at which total costs that is, variable plus non-variable are just covered is the break even volume” and it is the least volume that an organization should operate in order to remain in business (Harvard Business School, 1987). There are several assumptions that are made in order to calculate the break even figures since with all the factors considered, it is very hard to compute the figures. In determining the break even figures for the firm, French makes some implicit assumptions. Most of these assumptions are evident in the conversation he is having with the participants at the meeting. In his calculations, Mr. French does not give room for the excepted sales volume increase which according to Cooper, one of the participants from the production department, will increase sales by 20%. He further assumes that the plant capacity is only at 90% utilization implying that it is not fully utilized. However, we learn from Williams (who is from the manufacturing department) that the plant capacity may be at...

...RESTRICTED INTERNAL USE ONLY
BILLFRENCHBillFrench picked up the phone and called his boss, Wes Davidson, controller of DuoProducts Corporation. “Wes, I’m all set for the meeting this afternoon. I’ve put together a set of break-even statements that should really make people sit up and take notice – and I think they’ll be able to understand them, too.” After a brief conversation, French concluded the call and turned to...

...BillFrench Case
CASE : BILLFRENCH 1. What are the assumptions implicit in Bill French’s determination of his company’s break-even point? Assumptions Sales volume will be maintained. No planned changes in volume next year Only one, aggregate break-even point is utilized in the analysis. Sales mix will remain constant. Linearity will be exhibited by both total revenues and expenses over the relevant range. No capital...

...1. aWhat are the assumptions implicit in Bill French’s determination of his company’s break-even point?
* He has assumed that there is just one breakeven point for the firm (by taking the average of the 3 products).
* He has also assumed that the sales mix will remain constant. Total revenue and total expenses behave in a linear manner over the relevant range.
* Since the capacity is being expanded to increase production of Product C, it could be assumed that this...

...1. What are the assumptions implicit in Bill French’s determination of his company’s breakeven point?
There are a number of simplifying assumptions made by BillFrench in his calculations of the breakeven point of his company, Duo – Products Corporation. First, he had assumed that the market conditions will remain the same. Second, his calculations are based on the last year prices; it does not take into account in any change in prices....

...
BillFrench Case
1. What are the assumptions implicit in Bill French’s determination of his company’s break-even point?
He has assumed that there is only one break-even point for the firm’s three products by taking the average.
Labor Union will not affect the product prices no effect on the break-even analysis.
Constant dividends were given to stockholders.
Production of product “A” will be decreased and the other hand product “C” capacity...

...BillFrench case
In this case, BillFrench had gathered information and calculated Break Even Point (BEP) based on few assumptions:
1) Product mix considered constant.
2) Considered that there is just one breakeven point for the company.
3) Fixed and variable cost is assumed to be constant.
4) No inventory.
5) Price assumed to be fixed.
Calculation of breakeven point based on assumptions:
Table 1: Initial Cost analysis
Initial...

...Fixed Cost 3
Change in Product Mix and Sales Price 3
The Bonus Dividend Plan 3
Union Demand 4
Change in Product Emphasis 4
Recommendations 5
Revised CVP Income Statement 5
Required Levels of Operation 6
Case Context
Case Background
The case of BillFrench is a good illustration to understand the use and limitations of Cost-Volume-Profit (CVP) Analysis. CVP which deals on the relationships of price, costs, volume, and mix of products is a very useful tool for the...

...Matthew Maskarinec
Strategic Cost Management
BillFrench Case Analysis
1) 1. In a “normal year,” what is the break-even point in units for the year when performing CVP analysis on a product-by-product basis?
Product A
Product B
Product C
USP (given)
$1.67
$1.50
$0.40
UVC (given)
$1.25
$0.63
$0.25
UCM
$0.42
$0.87
$0.15
FC (given)
$170,000
$275,000
$75,000
BEP (units)
404,762
316,092
500,000
BEunits=1,220,854
Calculations:
UCM: Product A (1.67-1.25)= .42...

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