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Dublin Case, Accounting

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Dublin Case, Accounting
April 2011, Tilburg
Case 202
The Dublin Shirt Company, Peter Clarke, University of Dublin

Question 1. A calculation of breakeven point (in units) for the year ended 2004. For the purpose of simplifying this calculation, you should assume that ONLY direct material and direct labor costs are considered variable with respect to changes in volume. Clearly identify your assumption regarding the sales mix in your calculation and specify why this assumption is important in the context of CPV analysis.

For this calculation certain assumptions were made.
- Sales prices remain unaltered: €6,60, €6,20 and €5,45 for XL, Large and Medium respectively.
- The sales increase would be proportionately distributed over the 3 shirt sizes. To calculate these, the actual sales over 2004 were taken as a guideline to set a percentage which would distribute the shirts. (see calculation 1)
- Only direct materials and direct labor were calculated as being variable when changing the volume. (see calculation 2)
- Non-manufacturing overhead and selling and distributing overhead costs combined to form total administration expenses are taken as fixed costs. (see calculation 3)
- Manufacturing overhead was calculated by multiplying sales quantity over 2004 by the assigned ‘Mfg overhead per unit’ (Calculation 4)
- Customizing costs which total to €3.823.600,00 are taken as fixed costs.
Sales Price (2004) Sales Volume (2004) Sale Share in %
XL € 6,60 544.000,00 20,08%
Large € 6,20 655.000,00 24,18%
Medium € 5,45 1.510.000,00 55,74%
Total 2.709.000,00 100,00%
(Calculation 1)

Var. Costs Direct materials Direct labour Total variable costs
XL € 0,60 € 0,40 € 1,00
Large € 0,55 € 0,35 € 0,90
Medium € 0,39 € 0,30 € 0,69
(Calculation 2)

Non-manufacturing overhead € 5.761.600,00
Selling and distributing overhead € 3.584.450,00
Total: Administration expenses € 9.346.050,00
(Calculation 3)

Manufacturing overhead Sales Volume (2004) Mfg Overhead (per unit) Total Mfg
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