Bridgestone

1363 Words Mar 22nd, 2014 6 Pages
Issues for Discussion 1. What is the weighted average contribution margin (WACM) percentage for Bridgestone’s next annual budget?
WACM = Contribution Average/Total Revenue WACM = $3,500,00/5,000,000 WACM = 70% 2. What does a high weighted average contribution margin (WACM) percentage mean for the management of Bridgestone?

3. Is Bridgestone able to plan for breakeven or a modest over-recovery of expenses (or profit) for the next year? If the center achieves breakeven or a modest over-recovery and you are concerned about events that could cause a potential loss, what would you try to change? (You may consider both on- and off-campus programs.)

Break-even = Fixed Cost/WACM
$3,493,700/70% = $4,991,000
Profit = CM – FC
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5. Fixed costs can be discretionary or committed. Using your judgment based on the discussion in the case, identify which costs are likely to be discretionary. Assuming that management is able to decrease discretionary fixed costs by 10%, what would be the impact on Bridgestone’s break-even point revenues? Fixed Costs | Original Amount | Committed or Discretionary | | New Amount | Salaries & Benefits | $1,327,607 | Discretionary | -10% | $1,194,846 | Consulting Fees | $174,685 | Discretionary | -10% | $157,217 | Rent | $419,244 | Committed | | $419,244 | Transportation | $104,811 | Discretionary | -10% | $94,330 | Office Supplies | $69,874 | Discretionary | -10% | $62,887 | Deprecitaion | $873,424 | Committed | | $873,424 | Other | $524,055 | Discretionary | -10% | $471,650 | New Fixed Costs | $3,493,700 | | | $3,273,598 | | | | | |

New break-even point = new fixed costs/WACM
$3,273,598/70% = $4,676,568.50
Change in Break-even $4,991,00 - $4,676,568.50 = $314,431.50 6. As Bridgestone operates during the next year, do some services deserve more attention than others? (hint: what is their relative contribution to the WACM % and to the total contribution margin? Which services? | Assessment | Urinalysis | Case Management | Group Counseling | Individual Counseling | Crisis Intervention | Intensive Outpatient | Meidcal Somatic | Methadone