1. Formula for break even point in unit is
Fixed cost/contribution margin per unit
Here Fixed cost =Fixed Cost of goods sold + Fixed Marketing Expenses +Fixed Administrative
= $9,300,000 + $1,35,000+ $6,000,000 = $15,43,5000.
Contribution Margin per unit= Sales Per unit - variable expenses Per unit
Sales
Model 101 = 16000 units x $650 =$10,400,000
Model 201 = 19000 units x $750 =$14,250,000
Model 301 = 11000 units x $1100= $12,100,00
Hence Total Sales =$36,750,000
Sales Per unit = $36,750,000/(16000 units +19000 units +11000 units) =$798.91
Variable expenses per unit = (16000 units x $250 +19000 units x $200 +11000 units x $500)/(16000 units +19000 units +11000 units) =$289.13
Hence Contribution Margin = ($798.91-$289.13)=$509.78
Hence Break even point in Units = $15,43,5000/$509.78= 30278 units
Hence Break Even point in Sales Dollars = Sales Price X Break Even point units = $798.91 x 30278 units =$24,189,397.
2. If Sales commission 15% then sales commission increase per unit=($4,410,000 x 15%)/46000 units =$14.38
And variable expenses per unit would be = $289.13+$14.38=$303.51
Hence Contribution margin per unit would be = $789.91 -$303.51=$495.40
Break even point in units = $15,43,5000/$495.40=31157 units
Hence Break Even point in Sales Dollars = 31157 units x $789.91=$24,891,639.
Margin of Safety = Actuals Sales - Break Even points = $36,750,000-$24,891,639 =$11,858,361
3. If fixed increase by 10% then new fixed cost would be =$15,43,500 x 110%=$16,978,500
If variable expense reduce by 5% then new variable expenses per unit =$289.13x 95% =$274.67.
Contribution margin per unit =$789.91-$274.67 =$524.24
Break even points in units = $16,978,500/$524.24=32387 units
Break even point in Sales Dollars = 32387 units x $789.91 =$25,874,298.
4.if $6,500,00 invest in in fixed marketing expenses then fixed cost would stand = $15,43,500 +$6,500,00 =$16,085,000
if Sales of model 301 is increased by 8% then total sales would be
Model 101 = 16000 units x $650= $10,40,0000
Model 201 = 19000 units x $750= $14,250,000
Model 301 = (11000 units x 108%) x $1100 =$13,068,000
Total sales units =46880 units and Sales = $37,718,000 ,Sales Per unit =$804.56
Contribution margin per unit =$804.56 -$289.13=$515.43
Break even point in units =$16,085,000/ $515.43=31207 units
Break even points in Sales Dollars = 31207 units x $804.56= $25,107,866.
Read the following scenario and complete the questions and tasks below. Mirabel Manufacturing is a small...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year as follows: $ 23,500,000 13,865,000 9,635,000 Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales Manufacturing expenses:...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 23,000,000 Manufacturing expenses: Variable $...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 17,500,000 Manufacturing expenses: Variable $...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 22,500,000 Manufacturing expenses: Variable $...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 25,500,000 Manufacturing expenses: Variable $...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 21,500,000 Manufacturing expenses: Variable $...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 21,500,000 Manufacturing expenses: Variable $...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 24,000,000 Manufacturing expenses: Variable $...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 22,000,000 Manufacturing expenses: Variable $...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: *Primarily depreciation on storage facilities. As Barbara handed the statement to Karl Vecci, Pittman’s president, she commented, “I...