Case 6-3 Bill French Answers

1. Bill French has assumed that there is only one breakeven point for the firm.
Another thing he assumed, is that there will be a constant sales mix, hence
total revenue and total expenses will have a linear relationship.
2. Breakeven number of units=Fixed costs/Contribution margin per unit,
Contribution margin per unit=selling price-variable cost per unit.
Aggregate
A
B
C
Sales at full capacity
2000000
Sales volume
1750000
400000
400000
unit sales price
6.948
10
9
Sales revenue
variable cost per unit
Contribution margin per
unit

950000
4.8

12160000
3.385

4000000
7.5

3600000
3.75

4560000
1.5

3.56

2.5

5.25

3.3

Total variable cost
Fixed cost

5925000
3690000

3000000
960000

1500000
1560000

1425000
1170000

Profit
ratios
Variable cost to sales
unit contribution to sales
utilization of capacity

2545000

40000

540000

1965000

0.4871906
0.5128094
0.875

0.75
0.25
0.2

0.416667
0.583333
0.2

0.3125
0.6875
0.475

Break Even Point(Units)

1035686

384000

297143

354545

-The level of operations that must be achieved to pay extra dividend, ignoring the
union demands are total revenues before tax deductions=$1.2 million.
Operating Income After taxes
$600,000.00
Selling Price
$6.95
Variable Cost per unit
$3.39
Contribution margin per unit
$3.56
operating income before tax
$1,200,000.00
total fixed cost
$3,690,000.00
Number of units required to be produced=(FC+OI)/Contribution $1,373,595.00
Operating Income After taxes
Selling Price
Variable Cost per unit
Contribution margin per unit
operating income before tax
total fixed cost
Number of units required to be produced=(FC+OI)/Contribution

$450,000.00
$6.95
$3.73
$3.20
$900,000.00
$3,690,000.00
$1,434,375.00

5 Total variable cost Fixed cost 1425000 1170000 3.00 $1.40 per unit we conclude that its not a good thing to manufacture poduct C.8 Sales revenue variable cost per unit Contribution margin per unit 4560000 1.690.000.95 $3.2 10 9 2. Beakeven analysis can be used in deciding wether or not to alter the existing product.200.20 $1. In product C at 2.000.73 $3.4 Sales revenue 10800000 6000000 3600000 1200000 .00 3.3 Profit 1965000(Investment a company can afford) Sales at full capacity Sales volume unit sales price 4.000. C Sales at full capacity Sales volume unit sales price 950000 4.125.Operating Income After taxes Selling Price Variable Cost per unit Contribution margin per unit operating income before tax total fixed cost Number of units required to be produced=(FC+OI)/Contribution $600.00 $3.00 $6.528. Aggregate A B C 2000000 1500000 600000 400000 500000 7.

3 0.375 0.9 6750000 2970000 4500000 960000 1500000 1560000 750000 450000 Profit 0 0 0 0 ratios Variable cost to sales 0.625 0. 5. It can be used to set sales target or conclude what prices will generate profit.75 0.58 0.7 2. Also it helps us see which products are better than others.416667 0.5 2.5 5.625 unit contribution to sales 0.375 Break Even Point(Units) 1100000 384000 297143 500000 Because the break even point of the aggregate must be higher than given.5 3.25 0.variable cost per unit Contribution margin per unit Total variable cost Fixed cost 4.75 0. .583333 0. It helps comprehend and see the relationship between cost.5 7.75 1.375 utilization of capacity 0.25 0.