Question

aits product at $4.50. for Adelle, however, som ier, so now you CHAPTER THREE It seems like you have had an impact. The company is now selling its prod ting in a rapid rise in sales. You want to have some specifics for Ada going to do some analysis and then write a memo. up with the cost was. Do not forget REQUIRED: a. Analyze the data Joey originally gave you for March, coming up with + formula and breakeven sales in units and dollars. b. Using the data from April and May, recalculate your cost formulas. Do not to add $1,000 to the fixed costs each month to cover your salary! C. What is Adelle's breakeven point now? d. You decide your job is done, so you give Adelle your notice. This makes her a bi worried, but you console her with the fact that her fixed costs will drop back to the previous $11,400. Recalculate Adelle's breakeven point without your salary. e. What is Adelle's margin of safety in units and revenue dollars in April and May? f. Draft a memo to Adelle with the results of your analysis, including percentage change figures where logical. Use a business case structure that details each of the alternatives and results you attained.

Answer 1

1
Particulars	Volume Sold
(Units)	5,000	4,000	3,000
Materials ($)	6,250	5,000	3,750
Direct Labour ($)	2,500	2,000	1,500
Supplies ($)	750	600	450
Indirect Labour ($)	500	400	300
Electricity ($)	1,000	800	600
Other Overhead ($)	1,500	1,200	900
Variable Cost ($)	12,500	10,000	7,500
Selling Price per unit ($)	5.00	5.00	5.00
Sales value ($)	25,000	20,000	15,000
Contribution = Sales - Variable Cost ($)	12,500	10,000	7,500
Contribution per unit	2.50	2.50	2.50
Fixed Costs
Depreciation ($)	2,900	2,900	2,900
Rent ($)	3,500	3,500	3,500
Indirect Labour ($)	2,500	2,500	2,500
Electricity ($)	500	500	500
Other Overhead ($)	2,000	2,000	2,000
Total Fixed Costs	11,400	11,400	11,400
Break Even Point (Total Fixed Cost/ Contribution per unit)	4,560	4,560	4,560
Break Even Sales (BEPxSelling Price per unit)	22,800	22,800	22,800
Break up of Semi Variable Cost to Fixed and Variable
(Units)	5,000	4,000	3,000
Indirect Labour	3,000	2,900	2,800
Change in Cost		100	100
Change in Units		1,000	1,000
Variable Component per unit		0.1	0.1
Variable Component	500	400	300
Fixed Component	2,500	2,500	2,500
Electricity	1,500	1,300	1,100
Change in Cost		200	200
Change in Units		1,000	1,000
Variable Component per unit		0.2	0.2
Variable Component	1,000	800	600
Fixed Component	500	500	500
Other Overhead	3,500	3,200	2,900
Change in Cost		300	300
Change in Units		1,000	1,000
Variable Component per unit		0.3	0.3
Variable Component	1,500	1,200	900
Fixed Component	2,000	2,000	2,000

2
Particulars	Volume Sold
Month	April	May
(Units)	5,500	6,000
Materials ($)	5,500	6,000
Direct Labour ($)	2,200	2,400
Supplies ($)	550	600
Indirect Labour ($)	550	600
Electricity ($)	1,100	1,200
Other Overhead ($)	1,100	1,200
Variable Cost ($)	11,000	12,000
Selling Price per unit ($)	4.50	4.50
Sales value ($)	24,750	27,000
Contribution = Sales - Variable Cost ($)	13,750	15,000
Contribution per unit	2.50	2.50
Fixed Costs
Depreciation ($)	2,900	2,900
Rent ($)	3,500	3,500
Indirect Labour ($)	2,500	2,500
Electricity ($)	500	500
Other Overhead ($)	2,000	2,000
Salary ($)	1,000	1,000
Total Fixed Costs	12,400	12,400
Break Even Point (Total Fixed Cost/ Contribution per unit)	4,960	4,960
Break Even Sales (BEPxSelling Price per unit)	22,320	22,320
Break up of Semi Variable Cost to Fixed and Variable
(Units)	5,500	6,000
Indirect Labour	3,050	3,100
Change in Cost		50
Change in Units		500
Variable Component per unit		0.1
Variable Component	550	600
Fixed Component	2,500	2,500
Electricity	1,600	1,700
Change in Cost		100
Change in Units		500
Variable Component per unit		0.2
Variable Component	1,100	1,200
Fixed Component	500	500
Other Overhead	3,100	3,200
Change in Cost		100
Change in Units		500
Variable Component per unit		0.2
Variable Component	1,100	1,200
Fixed Component	2,000	2,000

3.

Particulars	Volume Sold
Month	April	May
(Units)	5,500	6,000

Break Even Point (Total Fixed Cost/ Contribution per unit)	4,960	4,960
Break Even Sales (BEPxSelling Price per unit)	22,320	22,320

4.

4
Particulars	Volume Sold
Month	April	May
(Units)	5,500	6,000
Materials ($)	5,500	6,000
Direct Labour ($)	2,200	2,400
Supplies ($)	550	600
Indirect Labour ($)	550	600
Electricity ($)	1,100	1,200
Other Overhead ($)	1,100	1,200
Variable Cost ($)	11,000	12,000
Selling Price per unit ($)	4.50	4.50
Sales value ($)	24,750	27,000
Contribution = Sales - Variable Cost ($)	13,750	15,000
Contribution per unit	2.50	2.50
Fixed Costs
Depreciation ($)	2,900	2,900
Rent ($)	3,500	3,500
Indirect Labour ($)	2,500	2,500
Electricity ($)	500	500
Other Overhead ($)	2,000	2,000
Total Fixed Costs	11,400	11,400
Break Even Point (Total Fixed Cost/ Contribution per unit)	4,560	4,560
Break Even Sales (BEPxSelling Price per unit)	20,520	20,520

5
Particulars	Volume Sold
Month	April	May
(Units)	5,500	6,000
Margin of Safety = Sales - Break Even Sales
Sales value ($)	24,750	27,000
Break Even Sales ($)	22,320	22,320
Margin of Safety ($)	2,430	4,680