Management accounting
This year, Cairo Company sold 35,000 units its only product for $16 per unit. Manufacturing and selling the product required $120,000 of fixed manufacturing costs and $180,000 of fixed selling and administrative costs. Its per unit variable costs were as follows:
Next year, the company will use new material that is easier to work. The new material will reduce material costs by 60% and direct labour costs by 40% and will not affect quality or marketability. Management is considering an increase in the unit sales price to reduce the number of units sold because the factory’s output is nearing its annual capacity of 40,000 units. Two plans are being considered. Under Plan 1, the company will keep the price at the current level and sell the same volume as last year. Under Plan 2, the company will increase price by 25%. This price will decrease unit sales volume by 10%. Under both plans, total fixed costs and the variable costs per unit for overhead and for selling and administrative costs will remain the same.
Required:
1. Using Excel, prepare a fully labelled breakeven chart for both plans (2 charts). Charts should display all major and minor gridlines.
2. Using Excel, prepare a forecasted contribution statement for the current situation and both plans.
3. Advise the company, based on your results for requirements 1 and 2.
4. Why is spreadsheet analysis an important tool for management accountants?
NB. You will be assessed based on your use of the formulas.
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Required: 1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2. (Round "per unit answers" and "CM ratio percentage answer to 2 decimal places.) This year Burchard Company sold 35,000 units of its only product for $16.00 per unit. Manufacturing and selling the product required $120,000 of fixed manufacturing costs and $180,000 of fixed selling and administrative costs. Its per unit variable costs follow Material Direct labor (paid on the basis of completed...
This year Bertrand Company sold 40,000 units of its only product for $25 per unit. Manufacturing and selling the product required $200,000 of fixed manufacturing costs and $325,000 of fixed selling and administrative costs. Its per unit variable costs follow. tion $8.00 5.00 Material Direct labor (pald on the basis of completed units) Variable overhead costs, Variable selling and administrative costs 1.00 10.50 Next year the company will use new material, which will reduce material costs by 50% and direct...
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Required information [The following information applies to the questions displayed below.] This year Burchard Company sold 45,000 units of its only product for $18.00 per unit. Manufacturing and selling the product required $130,000 of fixed manufacturing costs and $190,000 of fixed selling and administrative costs. Its per unit variable costs follow. Material $ 5.00 Direct labor (paid on the basis of completed units) 4.00 Variable overhead costs 0.50 Variable selling and administrative costs 0.30 Next year the company will use...
Required information (The following information applies to the questions displayed below) This year Burchard Company sold 45,000 units of its only product for $18.00 per unit. Manufacturing and selling the product required $130,000 of fixed manufacturing costs and $190,000 of fixed selling and administrative costs. Its per unit variable costs follow. Material Direct labor (paid on the basis of completed units) Variable overhead costs Variable selling and administrative costs $ 5.00 4.00 8.50 Next year the company will use new...
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