Bill French Case Reading Notes

Hugh Fraser identifies a number of issues related to the corporate (administrative) view of Bill’s analysis.
Which of the following is not a concern identified by Hugh?
Product C’s price increase needs to be incorporated in a revised analysis.

True or false? From Exhibit 2, it appears as if the distribution of individual products’ fixed costs is
proportional to the distribution of individual products’ sales volume.
False

In the case, one of the managers states that Bill's original analysis only provides a single break-even
point, and therefore fails to take into account the fact that the firm has three different products (i.e,.
Product A, Product B, and Product C). Based on your answer to the previous question, which of the
following statements best characterizes Bill's response to this criticism of his original analysis.
Bill did take into account the different products in his original analysis, because he actually used
the weighted-average contribution margin approach originally (that's why the answer to the previous
question is pretty close to Bill's break-even estimate, other than maybe some rounding)

Besides the "normal" assumptions underlying CVP analysis, what assumption is the WACM method of
calculating break-even points susceptible to?
The sales and production mix can be estimated and is accurate

Besides the "normal" assumptions underlying CVP analysis, what assumption is the individual product
method of calculating break-even points susceptible to?
Fixed costs for each individual product can be estimated and are accurate

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