The University of Findlay

Assignment: Project 1

Date: 03-20-2016

In partial fulfillment of the requirements for

Accounting for Managers
MBA 670.51 Spring Block II

Submitted to
Dr. Patricia Abels

By
Snehith Deshpande

Student Id: 503262, Email: Deshpandes@findlay.edu, Phone: 770-608-7249

1)
Contribution product for each antique product:
Formula for Contribution Margin = Sales - Variable costs
C.M for Clocks = $ 700 - $ 245 = $455

(Given S.P = $700, V.C = $245)

C.M for Dinette Sets = $ 3,700 - $ 1,165 = $2535 (Given S.P =$3,700, V.C =$1,165)
C.M for Bedroom Suites = $ 6,500 - $ 1,955 = $4545 (Given S.P = $6,500, V.C = $1,955)

2)
Monthly Breakeven in units:
Formula For Breakeven in Units = Fixed Costs / Contribution Margin
Breakeven for Clocks = 30% of $225,000 / $455 = 148.35 = 149Units (Quantity)
Breakeven for Dinette Sets = 30% of $225,000 / $2535 = 26.62 = 27Units
Breakeven for Bedroom Suites = 40% of $225,000 / $4545 = 19.80 = 20Units

3)
Income Statements:
Clocks:
Sales

434,000

(Given, $700 * 620units = $434,000)

Variable Costs

-151,900

($245 * 620Units = $151,900)

Contribution Margin 282,100

Fixed Costs

-67,500

Net Income

214,600

($455 * 620Units = $282,100)

(30% of $225,000 = 67,500)

Dinette Sets:
Sales

666,000

($3,700 * 180units = $666,000)

Variable Costs

-209,700

($1,165 * 180units = $209,700)

Contribution Margin 456,300

Fixed Costs
Net Income

-67,500

(30% of $225,000 = $67,500)

388,800

Bedroom Suites:
Sales
Variable Costs

715,000

( $6,500 * 110units = $715,000)

-215,050

($1,955 * 110units = $215,050)

Contribution Margin 499,950

Fixed Costs

-90,000

Net Income

409,950

(40% of $225,000 = $90,000)

Combined Income Statement:

Sales

1,815,000

Variable Costs

-576,650

Contribution Margin 1,238,350

Fixed Costs

-225,000

Net Income

1,013,350

(Clocks +D.S+B.S)

4)

Income Statement for Clocks, Dinette Sets & Bedroom Suites:

Sales

1,815,000

Variable costs

-576,650

(Derived from problem 3)

Contribution Margin 1,238,350

Fixed Costs

-225,000

Net Income

1,013,350

Income statement After Dropping the Clocks:

Sales

1,381,000

Variable Costs

-424,750

(B.S + D.S)

Contribution Margin 956,250

Fixed Costs

-225,000

Net Income

731,250

I would think dropping the Clocks from its Product line would be a bad idea as we can see from
the above that if they drop the clocks they can lose the Net Income, which they make now and
also in future, there will be a burden on the fixed costs for other products.

5)
Advertising was increased = $12,000
Profits

= $105,000

Fixed costs for clocks

= 30% of $225,000 + $12,000 = $79,500

Clocks in Units = Fixed Costs + Profit / Contribution Margin

= 79,500 + 105,000 / 455 (contribution Margin is taken from 1st answer)
= 405.4945
= 406units
Additional clocks to be sold over breakeven = 406 units - 149units (Break even from 2nd)
= 257Units
6)
The bid for which Clem is participating is a sealed quote, so it would be
unethical to place the bid based on the quote of the others, but it has to be
done for the competitive price as well as profit. As Clem, could understand
that the competitors have quoted the price for $600 for each clock which
makes $90,000 for 150 clocks. If Clem has to manufacture only 150 clocks in
a month and sells at the competitor's rate i.e. $600 there would be a loss of
$14,250 as the variable expenses for each clock is $245 and the fixed
expense is $67,500. From this, we can understand that if Clem quotes less
than $600 which is competitor's price, then company will have to face a loss
on it which is not suggestible.