Bridgestone

1. What is the weighted average contribution margin (WACM) percentage for Bridgestone’s next annual budget?

* The WACM% helps us to control the actual operations of Bridgestone as it allows us to see which service provides a higher rate of contribution & which leads to a deficit. This information would help Bridgestone to promote certain services like Urinalysis, Individual & Group Counselling through advertisements and other promotional activities. Moreover, the individual contribution margin allows us to see how each category is performing.

The percentage Breakeven Sales Change can be calculated simply by dividing the unit sales change by the initial sales level, or may be calculated more directly with the following expression:

In order to calculate the breakeven point, we use the following equation and budget data:

Although the financial goal is to create profit, we need to calculate the breakeven point to get started.

5. Determine the necessary sales in unit and dollars to break-even or attain desired profit using the break-even formula.

Determine the unit break-even point, assuming fixed costs are $60,000 per period, variable costs are $16.00 per unit, and the sales price is $25.00 per unit.

Because each product has a different contribution margin percentage, the volume required for each break-even point would be different and will not add up to the company’s overall break-even volume of 1,100,000 units; the overall break-even volume assumes that there is only one contribution margin percentage which is :

Actual sales = 1686 (in million €) and Break even sales = 1126.61(in million €)

Unit CM= $160 average full passenger fare – $70 average variable cost per passenger =$ 90

Although, break-even is very helpful for a company to see where they are and how much improvement they can make, the company can never say that it is 100% correct as change in costs or selling price can affect this analysis greatly. Also, in the short-run break-even analysis can show an accurate figure where as in a long run, it will be a lot more difficult. So, break-even analysis is not that accurate.

Bridgestone offers 10 services designed to treat a large array of substance dependencies from the point of detoxification to supporting long-term sobriety and preventing relapses.

This question gives students an opportunity to exercise their ability to interpret break-even analyses. Key teaching points should include explaining the preparation of a break-even chart, the interpretation of the break-even volume (938,799 hectoliters [HL]), and the comparison of the break-even volume to the current volume (1,173,000 HL). Another key point is that the chart in case Exhibit 5 is relevant only for the current cost structure of the company—if variable costs increase or the plant expansion is approved, the break-even volume will rise. Finally, students should be aided in understanding that “break-even” refers to operating profit, not free cash flow. The typical use of the break-even chart ignores taxes, investments, and the depreciation tax shield.

Break-even point analysis is a measurement system that calculates the margin of safety by comparing the amount of revenues or units that must be sold to cover fixed and variable costs associated with making the sales. In other words, it’s a way to calculate when a project will be profitable by equating its total revenues with its total expenses. There are several different uses for the equation, but all of them deal with managerial accounting and cost management (Break-Even Point, n.d.)

Breakeven = fixed cost/margin = total dollar fixed costs/ unit selling price –unit variable costs