Waltham Motors Division

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Question 1: Using budget data, how many motors would have to be sold for Waltham Motors Division to breakeven? In order to calculate the breakeven point, we use the following equation and budget data: Breakeven Sales*Unit Price-Unit Variable Cost= Fixed Costs

Breakeven=Fixed CostsUnitary Price-Unitary Variable Cost

Breakeven point=260,000864000/18000-512800/18000=13,226 units

Q2. Using budget data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) was allocated to planned production? What was the actual per unit cost of production and shipping? The results for the total expected cost/unit with budget data is:

Expected Cost/Unit= Manufacturing Overhead(variable and not variable)+Shipping Overhead# of Units=

The results for the total expected cost/unit with actual data is: 404,000+149,200+28,00014,000=$41,51/unit

Q3. Comment on the performance report and the plant accountant’s analysis of results. How, if at all, would you suggest the performance report be changed before sending it on to the division manager and Marco Corporation headquarters? The accountant is making a big mistake by comparing absolute numbers from Budgeted costs and revenues with Actual costs, since the actual number of units sold is less than the Budgeted amount. Therefore, a more detailed analysis must be done, and calculate the costs per unit, as Table 1 shows:

Table 1
From this new data on Table 1, we can make the following observations about the accountant’s comments: * The only cost that was underestimated (Favourable = F) is the Indirect Labour, so the first comment about being under budget on every single cost except for supervision is wrong. * The operating income has decreased, which is expected given the decrease in number of motors sold (4.000), but based on the report we still cannot tell whether that is the only reason. This also leads to a difference...
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