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    Group 2 - Breakeven Analysis

    Uploaded by

    Camille Vergara
    The Willow Furniture Company breaks even at a monthly production volume of 69.56 tables and earns a profit of $26,500 per month producing 300 tables. The Rolling Creek Textile Mill breaks even at an annual production volume of 296,470 yards of denim and loses money producing 18,000 yards per month. For Andy Mendoza to break even on his handcrafted dolls, he needs to sell 1,250 dolls per year after transitioning to mass production. The Rolling Creek Textile Mill operates at 98.82% of its maximum capacity when producing at its break-even volume of 24,705 yards per month. Raising its price per pound from $0.75 to $0.

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    Group 2 - Breakeven Analysis

    Uploaded by

    Camille Vergara
    245 views4 pages
    The Willow Furniture Company breaks even at a monthly production volume of 69.56 tables and earns a profit of $26,500 per month producing 300 tables. The Rolling Creek Textile Mill breaks even at an annual production volume of 296,470 yards of denim and loses money producing 18,000 yards per month. For Andy Mendoza to break even on his handcrafted dolls, he needs to sell 1,250 dolls per year after transitioning to mass production. The Rolling Creek Textile Mill operates at 98.82% of its maximum capacity when producing at its break-even volume of 24,705 yards per month. Raising its price per pound from $0.75 to $0.

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    The Willow Furniture Company breaks even at a monthly production volume of 69.56 tables and earns a profit of $26,500 per month producing 300 tables. The Rolling Creek Textile Mill breaks even at an annual production volume of 296,470 yards of denim and loses money producing 18,000 yards per month. For Andy Mendoza to break even on his handcrafted dolls, he needs to sell 1,250 dolls per year after transitioning to mass production. The Rolling Creek Textile Mill operates at 98.82% of its maximum capacity when producing at its break-even volume of 24,705 yards per month. Raising its price per pound from $0.75 to $0.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    245 views4 pages

    Group 2 - Breakeven Analysis

    Uploaded by

    Camille Vergara
    The Willow Furniture Company breaks even at a monthly production volume of 69.56 tables and earns a profit of $26,500 per month producing 300 tables. The Rolling Creek Textile Mill breaks even at an annual production volume of 296,470 yards of denim and loses money producing 18,000 yards per month. For Andy Mendoza to break even on his handcrafted dolls, he needs to sell 1,250 dolls per year after transitioning to mass production. The Rolling Creek Textile Mill operates at 98.82% of its maximum capacity when producing at its break-even volume of 24,705 yards per month. Raising its price per pound from $0.75 to $0.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    Structured Problem Solving

    1. The Willow Furniture Company produces tables. The fixed monthly cost of production is $8,000,
    and the variable cost per table is $65. The tables sell for $180 apiece.

    a) For a monthly volume of 300 tables, determine the total cost, total revenue, and profit.

    Total Cost = $ 27,000.00 Total revenue = $ 54,000.00 Profit = $ 26,500.00

    Quantity Cost per unit Amount


    Sales 300 $ 180 $ 54,000.00
    Less: Variable Cost 300 65 19,500.00
    Contribution Margin 300 $ 115 34,500.00
    Less: Fixed Cost 8,000.00
    Profit $ 26,500.00

    b) Determine the monthly break-even volume for the Willow Furniture Company.

    BE P unit = FC / CM per unit

    BE P unit = $8,000 / $ 115

    BE P unit = 69.56

    Quantity Cost per unit Amount


    Sales 69.56 $ 180 $ 27,502.2
    Less: Variable Cost 69.56 65 9,931.35
    Contribution Margin 69.56 $ 115 7,999.4
    Less: Fixed Cost 8,000.00
    Profit $ (.6)

    2. The Rolling Creek Textile Mill produces denim. The fixed monthly cost is $21,000, and the variable
    cost per yard of denim is $0.45. The mill sells a yard of denim for $1.30.

    a) For a monthly volume of 18,000 yards of denim, determine the total cost, total revenue, and profit.

    Total cost = $ 29,100.00 Total revenue = $ 23,400.00 Profit = $ (5,700.00)

    Quantity Cost per unit Amount


    Sales 18,000 $ 1.30 $ 23,400.00
    Less: Variable Cost 18,000 .45 8,100.00
    Contribution Margin 18,000 $ .85 15,300.00
    Less: Fixed Cost 21,000.00
    Profit $ (5,700.00)
    b) Determine the annual break-even volume for the Rolling Creek Textile Mill.

    BE P unit = FC / CM per unit

    BE P unit = $21,000 / $.85

    BE P unit = 24,705.88

    Quantity Cost per unit Amount


    Sales 24,705.88 $ 1.30 $ 32,117.644
    Less: Variable Cost 24,705.88 .45 11,117.646
    Contribution Margin 24,705.88 $ .85 20,999.998
    Less: Fixed Cost 21,000.00
    Profit $ (.002)

    Annually

    Quantity Cost per unit Amount


    Sales 296,470.56 $ 1.30 $ 385,411.728
    Less: Variable Cost 296,470.56 .45 133,411.752
    Contribution Margin 296,470.56 $ .85 251,999.976
    Less: Fixed Cost 252,000.00
    Profit $ (0.024)

    $21,000.00 x 12 (Annually) = $252,000.00

    3. Andy Mendoza makes handcrafted dolls, which he sells at craft fairs. He is considering mass-
    producing the dolls to sell in stores. He estimates that the initial investment for plant and equipment will
    be $25,000, whereas labor, material, packaging, and shipping will be about $10 per doll. If the dolls are
    sold for $30 each, what sales volume is necessary for Andy to break even?

    BE P unit = FC / CM per unit

    BE P unit = $25,000 / $20

    BE P unit = 1250

    Quantity Cost per unit Amount


    Sales 1,250 $ 30 $ 37,500.00
    Less: Variable Cost 1,250 10 12,500.00
    Contribution Margin 1,250 $ 20 25,000.00
    Less: Fixed Cost 25,000.00
    Profit $ -
    4. If the maximum operating capacity of the Rolling Creek Textile Mill described in Problem 2 is 25,000
    yards of denim per month, determine the break-even volume as a percentage of capacity.

    Break-even P units
    X 100
    Capacity for period

    24,705.88
    X 100
    25,000

    0.9882 x 100

    = 98.82%

    Quantity Cost per unit Amount


    Sales 24,705.88 $ 1.30 $ 32,117.644
    Less: Variable Cost 24,705.88 .45 11,117.646
    Contribution Margin 24,705.88 $ .85 20,999.998
    Less: Fixed Cost 21,000.00
    Profit $ (.002)

    5. Pastureland Dairy makes cheese, which it sells at local supermarkets. The fixed monthly cost of
    production is $4,000, and the variable cost per pound of cheese is $0.21. The cheese sells for $0.75 per
    pound; however, the dairy is considering raising the price to $0.95 per pound. The dairy currently
    produces and sells 9,000 pounds of cheese per month, but if it raises its price per pound, sales will
    decrease to 5,700 pounds per month. Should the dairy raise the price?

    No, because there will be an expected loss of $642.00 if they raised the price to $.95
    Current
    Quantity Cost per unit Amount
    Sales 9,000 $ .75 $ 6,750.00
    Less: Variable Cost 9,000 .21 1,890.00
    Contribution Margin 9,000 $ .54 4,860.00
    Less: Fixed Cost 4,000.00
    Profit $ 860.00

    Change of Plan
    Quantity Cost per unit Amount
    Sales 5,700 $ .95 $ 5,415.00
    Less: Variable Cost 5,700 .21 1,197.00
    Contribution Margin 5,700 $ .74 4,218.00
    Less: Fixed Cost 4,000.00
    Profit $ 218.00

    Members:

    De Lara, Camille

    Garcia, Janina Oana

    Magpantay, Errol

    Quiohilag, Carl Jeff

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