Submitted by: Submitted by ketty
Views: 734
Words: 1629
Pages: 7
Category: Business and Industry
Date Submitted: 06/24/2012 04:31 AM
Case 3.BW MANUFACTURING COMPANY
We have a lot of variable costs and we work on contribution margin.
The assignment:
1. Build a budget (and income statement) correctly. In between of Exhibit 1 and 2.
2. Calculate the 1st proposal (to drop Grill A).
3. Calculate the proposal #2 – lower the price of Grill C to 75$ (with a 20,000-unit increase in sales
of Grill C).
Correct budget (in cost per unit)
Grill A
$
150
Grill B
$
Sales price/unit
Planned volume
Turnover
VC
Material
Labor
Supplies
Energy (1/2)
Labor (1/2)
Fixed direct costs
2,800,000
Labor (1/2) 5
Supervision 8
Depreciation 22
Contribution
margin
$ 4,720,000
Fixed costs
Energy (1/2)
Head Office
Support
Gross margin
110
80,000
120,000
$ 12,000,000 $ 13,200,000
4,480,000
4,200,000
Total
400,000
$41,200,000
11,880,000
17
21
7
6
5
2,320,000
10
16
2
3
4
1,680,000
4
3
7
$
7,320,000
1,320,000
6
Grill C
$
80
200,000
$ 16,000,000
3,200,000
7
4
1
2
2
1,600,000
2
1
5
$ 11,200,000
1,200,000
6,080,000
All other
3
6
2
12
11
Brief income statement
Grill B
4,840,000
2
3
1
$ 18,400,000
Grill A
$ 12,000,000 $ 13,200,000 $
4,480,000
4,200,000
2,800,000
Grill C
16,000,000 $ 41,200,000
3,200,000
11,880,000
1,600,000
Total
Turnover
VC
Fixed direct
costs
Contribution
margin
$ 4,720,000 $ 7,320,000 $ 11,200,000
Fixed costs
$ 4,840,000
Gross
margin
1,680,000
6,080,000
$ 18,400,000
Correct budget in $
Sales price/unit
Planned volume
Turnover
VC
Material 1,360,000
Labor 1,680,000
Contribution
margin
VC indirect
Supplies
Energy (1/2)
Labor (1/2)
VC TOTAL
Contribution
margin (the
right)
Fixed direct
costs
Labor (1/2) 400,000
Supervision 640,000
Depreciation 1,760,000
840,000
1,000,000
3,600,000
Fixed costs
2,320,000
1,320,000
1,200,000
4,840,000...