Bill French Case

Topics: Variable cost, Costs, Management accounting Pages: 4 (1816 words) Published: October 30, 2010
Bill French Case
CASE : BILL FRENCH 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 investments that will increase fixed costs. Constant dividends are paid out to the company’s stockholders. Labor union will not significantly affect cost structure. No substantial changes in product prices. Given Information: Sales at Full Capacity (units) Actual Sales Volume Unit Sales Price Total Sales Revenue Variable Cost per Unit Total Variable Cost Fixed Costs Profit Ratios: Variable cost to sales Unit contribution to sales Utilization of capacity Breakeven Point (Original Sales) Aggregate A 2,000,000 1,500,000 600,000 $7.20 $10.00 10,800,000 6,000,000 4.50 7.50 6,750,000 4,500,000 2,970,000 960,000 1,080,000 540,000 0.625 0.375 75% 0.75 0.25 30% B 400,000 $9.00 3,600,000.000 3.75 1,500,000 1,560,000 540,000 0.42 0.58 20% C 500,000 $2.40 1,200,000 1.50 750,000 450,000 0 0.625 0.375 25% 2. On the basis of French’s revised information, what does next year look like: a. What is the break-even point? Breakeven Point (Reallocated Sales) Aggregate A 2,000,000.000 0.229 1,750,000.000 400,000.000 7.200 10.000 12,600,000.000 4,000,000.000 4.500 8.250 3,690,000.000 640,000.00 2.700 1.750 3.224 0.400 1,144,540.943 236,728.148 B 0.229 400,000.000 9.000 3,600,000.000 4.125 1,560,000.00 4.875 1.114 236,728.148 C 0.543 950,000.000 4.800 4,560,000.000 1.650 1,490,000.00 3.150 1.710 562,229.350 Sales at Full Capacity (units) Sales Mix Actual Sales Volume Unit Sales Price Total Sales Revenue Variable Cost per Unit Fixed Costs (Total) Contribution Margin per Unit Weighted Contribution Margin Breakeven Point b. What level of operations must be achieved to...
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