Please help me answer this question. Cheryl Montoya picked up the phone and call
ID: 2465767 • Letter: P
Question
Please help me answer this question.
Cheryl Montoya picked up the phone and called her boss. Wes Chan, the vice president of marketing at Piedmont Fasteners Corporation: "Wes, I'm not sure how to go about answering the questions that came up at the meeting with the president yesterday." "What's the problem?" The president wanted to know the break-even point for each of the company's products, but I am having trouble figuring them out." "I'm sure you can handle it. Cheryl. And. by the way, I need your analysis on my desk tomorrow morning at 8:00 sharp in time for the follow-up meeting at 9:00." Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning these products appear below Total fixed expenses are $400,000 per year. All three products are sold in highly competitive markets, so the company is unable to raise its prices witheut losing unacceptable numbers of customers. The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories. What is the company's over-all break-even point in dollar sales? (Round CM ratio to 4 decimal places and final answer to the nearest theusand dollars.) Of the total fixed expenses of $400.000. $20,000 could be avoided if the Velcro product is dropped. $80,000 if the Metal product is dropped, and $60,000 if the Nylon product is dropped. The remaining fixed expenses of $240,000 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely. What is the break-even point in unit sales for each product? (Do not round intermediate calculations.) If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company? (Do not round intermediate calculations.)Explanation / Answer
Contribution Margin %= overall company Contribution / Overall company Sales
Overall Company Contribution = Overall company Sales price – overall company Variable Cost
Let compute the break even in sales
Particulars
Velcro
Metal
Nylon
Total
Sales in Units
100,000
200,000
400,000
700,000
Selling Price
1.65
1.50
0.85
Variable Cost per unit
1.25
0.70
0.25
Contribution Per unit
0.40
0.80
0.60
Total Contribution
40,000
160,000
240,000
440,000
Total Sales
165,000
300,000
340,000
805,000
Contribution Margin %
54.66
Fixed Cost
400,000
Break even Sales
731,818
2)Break even point in units product wise
Break even point in units= Fixed cost/ contribution per unit
Particulars
Velcro
Metal
Nylon
Sales in Units
100,000
200,000
400,000
Selling Price
1.65
1.50
0.85
Variable Cost per unit
1.25
0.70
0.25
Contribution Per unit
0.40
0.80
0.60
Fixed Cost
20,000
80,000
60,000
Break even Sales in units
50,000
100,000
100,000
Particulars
Velcro
Metal
Nylon
Total
Sales in Units
100,000
200,000
400,000
700,000
Selling Price
1.65
1.50
0.85
Variable Cost per unit
1.25
0.70
0.25
Contribution Per unit
0.40
0.80
0.60
Total Contribution
40,000
160,000
240,000
440,000
Total Sales
165,000
300,000
340,000
805,000
Contribution Margin %
54.66
Fixed Cost
400,000
Break even Sales
731,818
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