Excerpt by Essay:
Financial Management Accounting
Value of the AOK Play
Contribution per device = Selling price per product – varying cost per unit
total variable expense (= total cost – total fixed costs) / sales
(3, 600, 500 – 2, 100, 000) / eighty, 000
(1, 500, 1000 / eighty, 000)
Value = 50 dollars per product
Fixed cost per unit
Fixed expense per product = total fixed costs / revenue
= 2, 100, 500 / 80, 000
sama dengan $26. 25per unit
Total cost per unit
Total cost = total changing cost & total fixed costs
sama dengan 18. seventy five x 70, 000 + 2, 100, 000
= 1, 500, 000 & 2, 95, 000
= 3, six hundred, 000
Price per product = total cost as well as sales
= 3, six-hundred, 000 / 80, 500
= $45per unit
Contribution margin
Contribution margin per unit sama dengan total contribution / sales
= 2, 500, 1000 / 85, 000
sama dengan $31. 25per unit
Question 2
Predicted Profits and Breakeven
Preliminary Projections
Breakeven = total fixed costs / contribution per product
= a couple of, 100, 500 /
sama dengan 67, 2 hundred
For this discharge, the company should sell 67, 200 item units ahead of breaking even. This means that for the company to comprehend any profit, the established number of items must be sold first. Just for this projection the profit the company will certainly realize is the remaining units’ sales. Offering the remaining merchandise units may be the company’s income. The profit as a result = leftover units times selling price = (80, 500 – 67, 200) by 50 sama dengan $640, 000. Therefore this kind of projection can give the company this kind of profit perimeter.
Production Manager’s Proposal
The production manager proposes a selling price of $45 which would increase revenue by 25% putting the sales by 100, 500 units. He further states this would enhance fixed development overhead by 50, 500 and fixed advertising overhead by simply 25, 000.
This would boost fixed costs by 75, 000 bringing on fixed costs of (2, 100, 1000 + seventy five, 000) 2, 175, 1000.
Variable costs per product = 18. 75
Selling price per device = forty-five
Contribution per unit sama dengan selling price – variable costs
= 45 – 18. 75
sama dengan 26. twenty-five
Breakeven = total fixed costs / contribution per unit
= 2, 175, 000 / 26. twenty-five
= 82, 857
In accordance to this projection, the need to sell 82, 857 devices before disregarding even. Although number of merchandise unit prior to earning virtually any profit is high, this kind of projection will give the company a gross profit of (remaining units x selling price) = (100, 000 – 82, 857 x 45) = (17, 143 x 45) sama dengan $771, 435 for the business. This pitch would bring about higher income than the business preliminary discharge.
Marketing Revenue Manager’s Pitch
The head of promoting and sales proposes the selling become increased by simply 10%. This may increase product sales to 90, 000 devices. Besides, this will increase promoting overhead by simply $25, 1000 and fixed development overhead by $20, 000. This pitch would take the fixed costs to (2, 100, 000 + forty five, 000) = 2, 145, 000. The selling price will be $55.
Adjustable costs every unit =
