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 increase should be allocated to this product. Production of Product A is to be scaled down, but its level of fixed costs has been assumed to be unchanged. * Constant dividends are paid out to the company’s stockholders. * Labor union will not significantly affect cost structure. No substantial changes in product prices.

2. On the basis of French’s revised information, what does next year look like? a. What is the break-even point?
The break even unit for the aggregate production is 1,035,686 units. Calculation of the break even points using the new estimates: Breakeven points have been calculated using the formula:
Breakeven number of units = Fixed costs / Contribution margin per unit, where Contribution margin per unit = Selling price – Variable cost per unit

b. What level of operations must be achieved to pay the extra dividend, ignoring union demands? To pay the extra dividend of 50% and to retain the profit of 150,000 we need to have the profit after taxes as 600,000. As half of the revenues go to the government as taxes therefore the total revenues before tax deduction should be equal to 1,200,000.

c. What level of operations must be achieved to meet union demands, ignoring bonus dividends?

d. What level of operations must be achieved to meet both union demands & bonus dividends?

3. Can the break-even analysis help the company decide whether to alter the existing product emphasis?...

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BillFrenchCase
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...

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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...

...Contents
Case Context 1
Case Background 1
Cost-Volume-Profit Analysis 1
Point of View 1
Problem Statement 1
Areas of Consideration 2
The Breakeven Point 2
Implicit Assumptions and Limitations 2
Per Product versus Aggregate Breakeven Point 2
Change in Volume and 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...

...to cover all its costs, which are fixed and variable costs. It is measured in either product units or dollars.
BillFrench, 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 BillFrench puts it, “the level of operation at which total costs...

...BillFrenchcase
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...

...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....

...Matthew Maskarinec
Strategic Cost Management
BillFrenchCase 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...

...Case Study: BillFrench
1.
Bill has assumed that Duo-Products' relevant range for fixed costs will remain constant even after planned expansion of production capacity. He has also 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. Two other assumptions are that total revenue and total expenses behave in a linear manner over...