INTRODUCTION: Hallstead Jewelers is a family owned company that has been around for generations. After the death of their father Gretchen and Michaela resumed ownership of a business that had been very successful for many years. However, due to changes in the market related to competition, customer demand, and demographics, business has not been as profitable as the sisters hoped it would be upon taking over of (remove) the company. Michaela and Gretchen are now faced with the tough task of revitalizing the business. They must first determine the best course of action to take after a decision to move to a new location that has proven to not be a key place for foot traffic and jewelry buyers. Michaela’s and Gretchen’s challenge is to …show more content…
The fluctuation causes the margin of safety to change since it is dependent on both of these variables.
Question 2: In order to compute the new breakeven point is sales tickets and sales dollars, we must break down the variable and fixed costs of which are in thousands. Please see figure 2-2 in the Appendix for the calculations. Based on the calculation, the new breakeven point in sales tickets is $2,435 and the breakeven in sales dollars is $3,063.230.
|Sales | |$ 9,639.90 | |
|Cost of goods sold* | | $ 5,570.00 | *(cost of goods sold
Breakeven Analysis for Product Tylenol Approach 1 - Same price as Tylenol Approach 2a - Cheaper than Tylenol Approach 2b - Cheaper w/lowered trade cost $ $ $ $ Unit Cost (Variable Cost) 0.60 0.60 0.60 0.60 Trade Cost (Selling Price to Retailers) $ 1.69 $ 1.69 $ 1.05 $ 0.70 Fixed Cost (Advertising) 2,000,000 6,000,000 6,000,000 6,000,000 Break-Even Quantity [Fixed Cost/(Trade Cost-Unit Cost)] 1,834,862 5,504,587 13,333,333 60,000,000 Contribution Margin (Unit) 64% 64% 43% 14%
In order to calculate the breakeven point, we use the following equation and budget data:
At breakeven, Q=6,658 paying customers who will be in attendance with an additional .25 x 6,658 = 1,665 comp customers.
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.
To find the break-even point for napkins, you use the same formula. The fixed cost is still $420,000.00. The selling price of napkins is $7.00. The variable cost is $4.50. $7.00 minus $4.50 is $2.50. So then you take $420,000.00 and divide it by $2.50 to find the breaking point of $168,000.00. The company will have to sell $168,000.00 to break even in sales. The margin for safety for napkins is -$48,000.00. This is found by subtracting the actual or expected cost of $120,000.00 by the break-even point of $168,000.00. You can cut sales by $48,000.00 and not sustain a loss.
In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.
In this case study, we will be analyzing the current position of how well Kingsford is within the marketplace and determine which of the issues are plausible causes in its drop in revenue. We will be creating a comprehensive strategy as well as a marketing plan to evaluate and adjust the matter at hand. First we will begin with identifying the issues and implementing a method to reemphasize the importance of marketing in the business. The goal is to create a marketing plan that will add value to Kingsford’s market share, sales, and profitability.
Based on the Excel Problem of chapter one, if the total capacity for this business is 725 will you stay in it? If you want to stay in it what price you need to obtain a break even point of 725?
Deborah Finn’s Rittenhouse Jewelers is a jeweler that is located in Philadelphia, Pennsylvania. They have been in the industry for more than 40 years. Deborah Finn’s Rittenhouse Jewelers specializes in diamonds, pearls, colored gemstones, jewelry care, and weddings and engagements. Their services include jewelry facelift, estate jewelry, repair and restoration, and shipping. Since 1983, Deborah Finn has been certified in diamonds by the
WLI executives had two options of pricing. First option was to position Niconil in the same price range as cigarettes. In other words, the expected retail price per unit would be £32.00. On the other hand, second price option was to place Niconil in the premium price range. Under this second option, the expected retail price per unit would be £60.00. Breakeven analysis would be very helpful for examining these two options.
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.
In the case study, as the annual fixed cost is $6,000,000 and the contribution margin per event is $1,900. Therefore, the breakeven point is at the 3,158
Question 4: Calculate each of the three products’ break even points using the data. Why is the sum of these three volumes not equal to the 1,100,000 unit’s aggregate break-even volume?
When price is $20.6, the quantity is 1,242,425 and profit is $101, we come near to break even point.