Question

Question 9a, 9b, 9c, and 9b and Question 6e and 6f

(Also please review if ive done the assignment correct)

1) Summarize the information for TrueBeat from 09 & 10 of HW 1.1 assuming they produce and sell 1,000 drum sets during the year. Remember to use 2 decimals for “per unit" values. Total Dollars TrueBeat - Summarized connect given data Average Cost per Unit Direct materials Direct labor $ 90 Variable manufacturing overhead $ 35 Fixed manufacturing overhead $ Fixed selling & administrative expense Variable selling & administrative expenses 25 IS 239.000 7000+ 16000 + 42,000 33,000+ 36600+ 170,000 Sales price per unit 516 2) Assume, due to the significant success of the drum sets, TrueBeat has obtained a contract to provide drum sets to a national merchandising chain. This contract is expected to increase TrueBeat's sales over the next 3 years. Current operations have a relevant range of 500 to 1,800 drum sets. TrueBeat's anticipates selling 3,000 units in Year 2, 5,000 units in Year 3 and 6,000 units in Year 4. Making the following cost changes, TrueBeat will increase their relevant range of production to between 4,000 and 8,000 drum sets. This significant increase to production will stair-step some of their costs. Specifically, the company will have to purchase additional equipment that will increase their machinery depreciation expense by 50% (Fixed overhead. The new equipment will allow TrueBeat to produce up to 10,000 drum sets a year. With increased production levels, TrueBeat will need to pay shift premium to assembly workers such that the average Direct labor will increase by $18 a unit. Additionally, production supervisor will be hired for $120,000 (fixed overhead). • Additionally, the company providing factory maintenance services has agreed to a new contract. The new contract will include a fixed component (overhead) equal to half of the original flat fee and a variable component (overhead) that will be $0.25 per assembly wage dollars The company needs to increase its sales staff. Rather than paying their sales staff commission only, TrueBeat will pay sales staff a flat salary (fixed S&A) equal to twice the amount paid in Year 1 and a reduced commission per drum set equal to 50% of the previous commission rate.

Answer 1

299 a) 300 i) 301 ii) 302 iii) 303 304 305 New CM Per Unit New Fixed expenses New Profit Formula 397.7 (516-118.3) 456000 (304000*1.50) Contribution Margin - Fixed expenses = Profit 2386200 - 456000 = 1930200 306 307 Under New Production Facility New Break-even 1147 591642 New Year 4 6000 3096000 1930200 Units Sales Revenue NOI 308 309 0 310 311 b) 312 i) 313 ii) 314 iii) 315 316 MOS units MOS dollars MOS Percent 4853 (6000-1147) 2504358 (3096000-591642) 80.89% Margin of Safety has declined from the base calculations 217

318) 319 Degree of Operating leverage Contribution Margin Operating Income 320 321 2386200 322 1930200 323 324 Degree of Operating leverage 1.24 325 326 Degree of Operating leverage has improved from base 327 328 d) 329 If I were of top management, I would be in favor of constructing a new plant as the NOI has increased 330 331 332