Essay on Business Analysis of Peak Garage Doors Inc

New Contribution Margin = New Price per unit – Variable cost per unit =$8.5-$2.5 =$6

8.20 equals $ 86,700. The contribution margin per unit at a retail price of Cr. 6.85 equal 1.95. The required volume will be the result of dividing the profit impact on the contribution margin per unit.

The fixed cost is assumed that Larry has discovered the other fixed cost incurred. The total investment is $800,000. The worst case scenario assumes that Larry got a total line of credit from the bank in the amount of $400,000 and invested $400,000 from other source. The Notes payable – short term and the long-term debt is (11.8 + 3.7) = 15.5 % from Table F in the handout. The Loan interest and payment per year is ($400,000 * 0.155)= $62,000. The Income data from Table F indicates that there is a 0.4% of all other expenses net out of the total sales which equals to $109,908 (5,700,666 gallons * $4.82 *0.4%) .

The company has been functioning well in terms of generating profit and demand so far. However, there will be a 20% increase in demand for the next month of operations as predicted by management, and the production and supply management's problems may come as a problem they can no longer afford.

There would still be a net loss in 2006 due to the increase of break-even point, which increased from $7,505 to $8,640.

13. If the selling price is $22 per unit, what is the contribution margin per unit sold?

Because each product has a different contribution margin percentage, the volume required for each break-even point would be different and will not add up to the company’s overall break-even volume of 1,100,000 units; the overall break-even volume assumes that there is only one contribution margin percentage which is :

In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.

1. The local Mastermind store sells innovative educational toys. Part of their service is giving advice to customers about the best toys for a particular age group, which requires having more customer service representatives in the store. During the month long Christmas buying season, it makes half of its $500,000 yearly sales. Its contribution margin on average is 40% and its fixed costs for the year are about $150,000. The owner believes that she could make even higher sales, if she had more customer service representatives on the floor during the peak season. She plans on hiring four more people for 200 hours each at $20 per hour. How much additional revenue does she have earn to the nearest dollar

Break-even Dollar Volume = Total Fixed Costs / Contribution Margin = $525,000 / 0.7111 = $738,282.40

If Marlene Herbert were to discontinue place mats, he would miss $270,000 that will go toward Mendel paper company fixed cost. The company currently has a plant overhead that is estimated at $420,000 for the quarter. In addition to the fixed plant overhead, the plant incurs fixed selling and administrative expenses per quarter of $118,000. This draws the company to a total fixed cost of $538,000. If Marlene Herbert were to discontinue the second highest contributor to the fixed cost, he would need to increase the volume of computer paper and lower material cost to help pull the contribution margin of the lowest product up to help support the lost of a whole product line.

If Jones-Blair cut prices by 20%, they would need to maintain the profit of $1.14M to keep the status quo. The contribution margin right now is 35%, if the prices were cut by 20%, the contribution margin decreases to 15%. 35% is converted into .35 and 20% is converted into .20. The required sales in order to maintain the status quo if prices were reduced by 20% is 28M. This is found by finding the gross margin which is current sales multiplied by the contribution margin, 12M * .35 = 4.2M. We would then need to maintain the same gross margin to find out the required sales, (12M + x) * .15 = 4.2M. Computation equates x to be $16M. The $16M that is required to maintain the same gross margin, added to the $12M of the current sales equals $28M. In order to maintain the current profit, Jones-Blair would have to increase sales by $16M, more than double the current amount. If chosen, this alternative would be a very poor choice.

3) Using the budget Data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocate to planned production? What was the actual cost per unit of production and shipping?

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No. of employees * (0.10 * Selling Price * Volume of sales) = $100000 + No. of employees * ($25000 + 0.05 * Selling Price * Volume of Sales)