# Bill French Case Analysis

Strategic Cost Management

Bill French 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 Product B (1.50-.63)= .87 Product C (.40-.25)= .15

BEP: Product A (170,000/.42)=404,762 Product B (275,000/.87)=316,092 Product C (75,000/.15)=500,000

2) In a “normal year,” what is the break-even point in units for the year assuming the sales mix implied by Exhibit 2? (Be sure to report sales volume for each product.)

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

Sales Mix

462,222

312,000

381,334

BEunits=1,155,556

Calculations:

UCM: (calculated above)

WACM: (.42 *600,000)+ (.87*400,000)+ (.15*500,000)=675,000

675,000/1,500,000= .45

Total BE: 540,000/ .45=1,155,556

Percentage of total sales: A-600,000/1,500,000=.40 B-400,000/1,500,000=.27 C-500,000/1,500,000=.33

Sales Mix: A-1,155,556*.4=462,222 B-1,155,556*.27=312,000 C-1,155,556*.33=381,334

3) Given the information Bill French received, what is the new break-even point in units for the year given the new implied sales mix? In your calculations, assume that (i) the increase in sales for Product C will happen regardless of changes in production costs, and (ii) the decrease in sales for Product A is exactly 1/3 of sales in a “normal year.” (Be sure to report sales volume for each product.)

Product A

Product B

Product C

Unit Sales

400,000

400,000

950,000

USP

$1.67

$1.50

$0.80*

UVC

$1.38

$0.69

$0.28

UCM

$0.29

$0.81

$0.52

Sales Mix

288,627

288,627

677,647...

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