Mechanical Engineer

MA N AG ERIAL ACCOUNTING B I LL FRENCH CASE

Fabian Michel Cantú Almaguer Franco Cantu Almaguer Lizbeth Garcia Banda Tobias Ricardo Solorza Monterrey Summer 2011

Managerial Accounting!

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MA N AG ERIAL ACCOUNTING

Bi" French Case

Original Analysis made considering actual sales originally presented in the meeting by Bill French Aggregate Sales at full capacity Actual Sales Unit Sale Price Total Sales Revenue Variable cost per unit Total Variable cost Fixed costs Net profit 2000000 1,500,000 1.2 1,800,000 0.75 1,125,000 520,000 155,000 600,000 1.6666666667 1,000,000 1.25 750,000 170,000 80,000 400,000 1.5 600,000 0.625 250,000 275,000 75,000 500,000 0.4 200,000 0.25 125,000 75,000 0 A B C

Ratios Variable cost to 0.625 sales Variable income to sales Utilization Capacity 0.375 0.75 0.25 0.4166666667 0.5833333333 0.625 0.375

75%

30%

20%

25%

Managerial Accounting!

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Aggregate Break Even 1,155,556 1,386,667

A 408,000 680,000

B 314,286 471,429

C 500,000 200,000

1. What are the assumptions implicit in Bill Frenchʼs determination of the companyʼs break-even point? The assumptions that Bill French determined for its first approach were the following:

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No change on products proportion sold. (Same as last year) He didnʼt consider any other expense rather than of production cost. As any expected dividends, government taxation, and labor union costs. No change on variable cost or fixed cost modification. No change on unit sales price

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2. On the basis of Frenchʼs revised information, what does next year look like: a) What is the break-even point? b) What level of operations must be achieved to pay the extra dividend, ignoring union demands? c) What level of operations must be achieved to meet the union demands, ignoring bonus-dividends? d) What level of operations must be achieved to meet both dividend and expected union requirements?

Managerial Accounting!

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a) With changes accordingly to Shift in expected...