Submitted by: Submitted by nyczwillzsta
Views: 247
Words: 678
Pages: 3
Category: Business and Industry
Date Submitted: 12/06/2013 10:26 PM
Berkshire Threaded Fasteners
1. If the company had dropped the 300 series as of January 1, 1974, what effect would that action have had on the profit for the first six months of 1974?
Base on my analysis of the company, it appears that the company should keep the 300 series since based on my analysis below, dropping the series will end up costing more than continue to produce it. The withdrawal of the 300 series will affect raw materials, labor, power, and repairs. It will have no effect on other costs since they are allocated across to three product lines. The results for the first six month of 1974 would project an operating income of $160,554 of the 300 series were produced. The sales would have been reduced by $2,714,179 and the variable cost would have been reduced by $1,523,000 associated to the 300 series item. Fixed costs remains the same. Please see below for profit & loss and discontinue 300 series analysis.
P&L Analysis
Product Line New SP Quantity New sales Previous Sales Change in Income
100 series $2.45 2,132,191 $ 5,223,868 $ 5,168,000 $ 55,868
200 series $2.58 1,029,654 $ 2,656,507 $ 2,598,000 $ 58,507
300 series $2.75 986,974 $ 2,714,179 $ 2,668,000 $ 46,179
Total $ 160,554
Discontinue 300 series
Change in Income
Sales $ (2,714,179)
Variable Cost:
Labor $ 688,000
Raw Materials $ 795,000
Power $ 30,000
Repairs $ 10,000
Total Variable Costs $ 1,523,000
Lost Contribution Margin $ (1,191,179)
Fixed Cost 0
Net Disadvantage $ (1,191,179)
Loss before Taxes $ (73,000)
Changes:
Increase of Sales $ 160,554
Net Disadvantage $ (1,191,179)
Loss before Taxes $ (1,103,625)
2....