Memorandum To: President, Smithen Company From: Student Name Date: January 22, 2014 Subject: Discrepancy in budgeted sales against actual sales The objective of this report is the investigation of the discrepancy in budgeted sales against actual sales in the previous month. This report was written after last month’s operating income fell well short of the expected result despite the company hitting the revenue target of $500,000. I have investigated and analysed the financial data relating to the
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problem, you need to find the change in contribution margin using the incremental analysis. Profit would remain unchanged if the change in fixed costs (advertising exp.) equals the change in contribution margin. 5-11 1. Breakeven point and sales sales 600k 40$/unit Variable expense 420k $28/unit CM 180k $12 Fixed expense 150k NOI $30k Fixed exp/ (cm/unit)= 150k/12= 12500 products Sales=12500*$40= $500,000 2. Total contribution margin is 150K at break-even point, which
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500 / .25 Break-even dollar sales = 22,000 5-9 1) Degree of operating leverage: Contribution margin / net operating income 36,000 / 12,000 = 3 2) Estimate the Impact on net operating income of a 10% increase: Percent change in net operating income = degree of operating leverage * percent change in sales Percent change in net operating income = 3 * 10% = 30% 3) Construct a new contribution format income statement for the company assuming a 10% increase in sales: If sales increase
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($200 x 15,000) $ 3,000,000 Total contribution margin ($800 x 15,000) $12,000,000 Fixed costs $10,000,000 Profit $2,000,000 b. What is the hospital’s breakeven point? Contribution Margin x Volume = Fixed Costs $800 x V = $10,000,000 V = 10,000,000/800 V = 12,500 visits to break even c. What volume is required to provide a profit of $1,000,000? A profit of $500,000? To obtain a profit of $1,000,000, the total contribution margin should be $1,000,000 greater than the fixed
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Iva Velkovska 9/21/2011 Berkshire Threaded Fasteners Company Case OVERVIEW Berkshire is one of the eight companies in threaded fasteners industry in New England. The company produces three types of metal fasteners (nuts & bolts), including 100 series, the 200 series and the 300 series. The products are sold by the company’s salaried sales force throughout New England. Berkshire Threaded Fasteners Company has recently lost their president, John Magers. The resulting appointment of his inexperienced
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it is important to understand how our company measures success. Our two measures of success will be based on quantitative data. These two measures are, 1) the percentage of market share we control in the countries we operate in, and 2) net contribution margin. All Smile will focus on various key performance indicators (KPIs) which have five mutual qualities: they are specific, measurable, achievable, realistic, and timely. KPIs will help our company measure the total effectiveness of our manufacturing
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The value chain is the sequence of business functions in which customer usefulness is added to products or services. In supporting managers, management accountants have three guidelines. These guidelines are: Cost-benefit analysis, behavioral considerations and technical considerations, and different costs for different purposes. Galway Co. management desires cost information regarding its Celtic brand. The Celtic brand is a(n) cost object. Cost objects are anything for which a measurement of cost
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Variable costs and the Contribution margin associated with Item 345. Variable costs: “Variable costs are costs that vary with the volume of activity”2 and they are: direct labor, Materials, Material spoilage & direct department expenses. Fixed costs: “Fixed costs are those that are independent of the level of activity”3 and they are: indirect department expense, Selling and Administrative expense, and General overhead. Changing the price will alter the unit contribution margin, which is the sale
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Issues for Discussion 1. What is the weighted average contribution margin (WACM) percentage for Bridgestone’s next annual budget? WACM = Contribution Average/Total Revenue WACM = $3,500,00/5,000,000 WACM = 70% 2. What does a high weighted average contribution margin (WACM) percentage mean for the management of Bridgestone? 3. Is Bridgestone able to plan for breakeven or a modest over-recovery of expenses (or profit) for the next year? If the center achieves breakeven or a modest over-recovery
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Snap Fitness Cost-Volume-Profit and Break-Even Analysis Anne, Bratcher Kim Collins, Heather Davis ACC/561 August 13, 2012 Dr. Sandra Welch Snap Fitness Even though owning a business can be costly, finding one that aligns with an individual’s ability to invest and operate is challenging. Health and fitness continues to be
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