Your company has developed this new product called Squeaky Doors. Why wait for a

Question

Your company has developed this new product called Squeaky Doors. Why wait for a door that becomes squeaky when you can have new doors that squeak immediately. The Marketing Manager is preparing their proposal to the CEO review meeting next week and asked you to help prepare the Break-Even analysis The manager has supplied you with the following information about the new product: Materials required Oak door 3 hinges Door handle (one handle) Squeaky juice and stain (1.5 gallons) 250 Per door 24 The package of hinges includes 12 hinges and the total cost o the package is $24 38 per handle 3 The hinges come in a package of 12 items Labor required to build the squeaky door 6 hrs Labor rate is $21 per hour The company also has the following monthly charges $ 3,500 $ 1,500 $8,000 Depreciation of equipment3,200 Rent of production area Insurance for area Supervision

Explanation / Answer

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1 FORMULA BREAK EVEN UNITS FIXED COST/(UNIT SELLING PRICE - VARIABLE COST) FIXED COST RENT 3500 INSURANCE 1500 SUPERVISION 8000 DEPRICIATION ON EQUIPMENTS 3200 ADVERTISING OF NEW PRODUCTS 3800 OTHER MONTHLY CHARGES 1200 UTILITIES 1900 FIXED COST 23100 UNIT SELLING PRICE 750 VARIABLE COST OAK DOOR 250 HINGES 6 DOOR HANDLE 38 SQEAKY JUICE AND STAINS 46.5 (31*1.5) LABOUR 126 (21*6) VARIABLE COST 466.5 BREAK EVEN UNITS 81.48 (23100/750-466.5) BREAK EVEN UNITS 82 2 INCOME STATEMENT REVENUE SALES 61500 (82*750) TOTAL REVENUE 61500 LESS EXPENSES VARIABLE 38253 38253 CONTRIBUTION MARGEN 23247 (61500-38253) LESS FIXED COST 23100 NET INCOME 147

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