Nama : Irga Ayudias Tantri

NIM : 12030121410011

Case 7-54
Oakley Company manufactures and sells adjustable canopies that attach to motor homes and
trailers. The market covers both new units as well as replacement canopies. Oakley developed its
20x2 business plan based on the assumption that canopies would sell at a price of $400 each. The
variable cost of each canopy is projected at $200, and the annual fixed costs are budgeted at
$100,000. Oakley’s after-tax profit objective is $300,000, and the company’s tax rate is 25
percent
While Oakley’s sales usually rise during the second quarter, the May financial statements
reported that sales were not meeting expectations. For the first five months of the year, only 350
units had been sold at the established price, with variable costs as planned. It was clear the 20x2
after-tax profit projection would not be reached unless some actions were taken. Oakley’s
president, Melanie Grand, assigned a management committee to analyze the situation and
develop several alternative courses of action. The following mutually exclusive alternatives were
presented to the president.
 Reduce the sales price by $40. The sales organization forecasts that with the significantly
reduced sales price, 2,700 units can be sold during the remainder of the year. Total fixed
and variable unit costs will stay as budgeted.
 Lower variable costs per unit by $25 through the use of less expensive raw materials and
slightly modified manufacturing techniques. The sales price also would be reduced by
$30, and sales of 2,200 units for the remainder of the year are forecast.
 Cut fixed costs by $10,000 and lower the sales price by 5 percent. Variable costs per unit
will be unchanged. Sales of 2,000 units are expected for the remainder of the year.
Required:
1. If no changes are made to the selling price or cost structure, determine the number of
units that Oakley Company must sell
a. In order to break even.
b. To achieve its after-tax profit objective
2. Determine which one of the alternatives Oakley Company should select to achieve its
annual aftertax profit objective.
Jawaban :
1. (a) In order to break even, Oakley must sell 500 units
Revenue = Variable Cost + Fixed Cost
$400X = $200X + $100.000
 $200X = $100.000
X = 500 Units
(b) In order to achieve its after-tax profit objective, Oakley must sell 2,500 units
Revenue = Variable Cost + Fixed Cost + Before-tax profit
$400X = $200X + $100.000 + ($300.000/ (1- 0,25)
$400X = $200X + $100.000 +$400.000
$200X = $500.000
X = 2.500 Units
2. Alternative 1
Revenue = ($400)(350) + ($360)(2.700)
= $ 1.112.000
Variabel Cost = $200 x 3.050
= $610.000
Before Tax Pprofit = $ 1.112.000 - $610.000 - $100.000
= $ 402.000
After Tax Profit = $ 402.000 x (1- 0,25)
= $301.500

Alternative 2
Revenue = ($400)(350) + ($370)(2.200)
= $ 954.000
Variabel Cost = ($200) (350) + ($175) (2.200)
= $455.000
Before Tax Pprofit = $ 954.000- $455.000- $100.000
= $ 399.000
After Tax Profit = $ 399.000 x (1- 0,25)
= $299.250
Alternative 3
Revenue = ($400)(350) + ($380)(2.000)
= $ 900.000
Variabel Cost = $200 X 2.350
= $470.000
Before Tax Pprofit = $ 900.000- $470.000- $90.000
= $ 340.000
After Tax Profit = $ 340.000 x (1- 0,25)
= $255.000
Oakley lebih baik memilih alternative pertama dikarenakan alternative ini menghasilakan
keuntungan yang tinggi dan merupakan satu-satunya alternative yang setara atau melebihi tujuan
laba perusahaan

Case 7-55
Niagara Falls Sporting Goods Company, a wholesale supply company, engages independent
sales agents to market the company’s products throughout New York and Ontario. These agents
currently receive a commission of 20 percent of sales, but they are demanding an increase to 25
percent of sales made during the year ending December 31, 20x2. The controller already
prepared the 20x2 budget before learning of the agents’ demand for an increase in commissions.
The budgeted 20x2 income statement is shown below. Assume that cost of goods sold is 100
percent variable cost.
The company’s sales manager, Joey Dulwich, is considering the possibility of employing full-
time sales personnel. Three individuals would be required, at an estimated annual salary of
$30,000 each, plus commissions of 5 percent of sales. In addition, a sales manager would be
employed at a fixed annual salary of $160,000. All other fixed costs, as well as the variable cost
percentages, would remain the same as the estimates in the 20x2 budgeted income statement
Required:
1. Compute Niagara Falls Sporting Goods’ estimated break-even point in sales dollars for
the year ending December 31, 20x2, based on the budgeted income statement prepared by
the controller
2. Compute the estimated break-even point in sales dollars for the year ending December
31, 20x2, if the company employs its own sales personnel.
3. Compute the estimated volume in sales dollars that would be required for the year ending
December 31, 20x2, to yield the same net income as projected in the budgeted income
statement, if management continues to use the independent sales agents and agrees to
their demand for a 25 percent sales commission.
4. Compute the estimated volume in sales dollars that would generate an identical net
income for the year ending December 31, 20x2, regardless of whether Niagara Falls
Sporting Goods Company employs its own sales personnel or continues to use the
independent sales agents and pays them a 25 percent commission.
Jawaban :
1. Estimated break-even based on the budgeted income statement

Sales (a) $ 10.000.000

Variable expenses:
Cost of sales $ 6.000.000
Commissions $ 2.000.000 $ 8.000.000
Contribution margin (b) $ 2.000.000
Contribution margin ratio (b) ÷ (a) = 20%

Fixed expenses $ 100.000

Contribution margin ratio 0,20
Break Even $ 500.000
2. Estimated break-even with company employing its own salespersons

Variable expense ratios:

Cost of sales 60%
Commissions 5%
Total 65%
Contribution margin ratio (100% - 65%) 35%
Fixed expenses:
Sales manager $ 160.000
3 salespersons @ $30,000 each $ 90.000
Administrative $ 100.000
Total $ 350.000

Fixed expenses $ 350.000

Contribution margin ratio 0.35
Break-even point $ 1.000.000

3. Estimated sales volume yielding target profit of $1,900,000

Target profit $ 1.900.000

Fixed expenses $ 100.000
Total $ 2.000.000

Variable expense ratios:

Cost of sales 60%
Commissions 25%
Total 85%
Contribution margin ratio (100% - 85%) 15%

Fixed expenses + Target profit $ 2.000.000

Contribution margin ratio 0.15
Sales volume to attain target profit $ 13.333.333

4. Profit = Sales - Variable expenses - Fixed expenses

With sales agents:
Profit = X - 0.85X - $100,000
With salespersons:
Profit = X - 0.65X - $350,000
X - 0.85X - $100,000 = X - 0.65X - $350,000
$250,000 = 0.20X
X = $250,000 ÷ 0.20
X = $1,250,000