Robin Simmons is ready to complete a cost-volume-profit analysis for 2016 for the Stellar Packaging Products manufacturing plant to determine…
Robin Simmons is ready to complete a cost-volume-profit analysis for 2016 for the Stellar Packaging Products manufacturing plant to determine if the break-even point is achieved, given the expected decline in volume. Specific costs for production of 500,000 units include the following:
|
Stellar Packaging Products |
Variable Costs Total OUR PROCESSOrderPaymentWritingDeliveryWhy Choose Us: Cost-efficiency, Plagiarism free, Money Back Guarantee, On-time Delivery, Total Сonfidentiality, 24/7 Support, 100% originality |
Fixed Costs Total |
|
;Raw materials |
;$ ; ; ; ; ; ; ; ; 400,000 |
; |
|
;Direct manufacturing labor |
;$ ; ; ; ; ; ; ; ; 200,000 |
; |
|
;Indirect manufacturing labor |
; |
;$ ; ; ; ; ; ; ; ; ; ; 105,000 |
|
;Factory Insurance & Utilities |
; |
;$ ; ; ; ; ; ; ; ; ; ; ; 63,000 |
|
;Depreciation — Machinery and factory |
; |
;$ ; ; ; ; ; ; ; ; ; ; ; 38,500 |
|
;Repairs and maintenance — factory |
; |
;$ ; ; ; ; ; ; ; ; ; ; ; 28,000 |
|
;Selling, marketing and distribution expenses |
;$ ; ; ; ; ; ; ; ; ; ; ; 40,000 |
;$ ; ; ; ; ; ; ; ; ; ; ; 80,000 |
|
;General and administrative expenses |
; |
;$ ; ; ; ; ; ; ; ; ; ; 120,000 |
There are no beginning or ending inventories. The total sales for 500,000 units produced are $2,000,000.
Instructions:
Answer the following questions given the fact pattern above, showing all calculations.
- What is the contribution margin per unit for each chocolate bar produced, given the fact pattern above?
- What is the Stellar Packaging’s U.S. division break-even point in units and dollars, given the fact pattern above?
- What is the Stellar Packaging’s U.S. division margin of safety and degree of operating leverage, given the fact pattern above?
- Write a brief explanation (approximately two paragraphs) that Simmons might deliver to management to inform them of the analytical outcome, given the projected revenue and cost. Does the company have to implement a cost-reduction strategy in order to break even?
