Break-Even Analysis The general formula for calculating break-even units is Break-even Units = Total Fixed Costs / (Unit Selling Price - Unit Variable Cost) In StratSim total fixed costs can be broken into discretionary marketing expenditures as well as fixed costs for plant and overhead. The selling price is the MSRP less the dealer discount, and the cost of materials and labor make up the variable cost. In this assignment you will allocate fixed costs across a portfolio of products and calculate the break-even units for each product. A firm's production capacity is 1.4 million units, with annual fixed costs of $2.2 billion for depreciation, plant maintenance, corporate marketing, and general overhead. Additional values for the three vehicles produced and sold by the firm are shown in the table below: Vehicle X Vehicle Y Vehicle Z MSRP $11,800 $19,000 $44,300 Dealer Discount 8% 13% 14% Variable Cost $8,300 $11,600 $27,900 Advertising & Promotion $38,000,000 $74,000,000 $99,000,000 Previous Unit Sales 500,000 400,000 300,000 QUESTION 1 a. Calculate the manufacturer's price to dealer (dealer invoice) for each product. Vehicle X Dealer Invoice $0 Vehicle Y Vehicle Z $ 0 b. Calculate the fixed costs for each product. For fixed costs that are not directly attributable to particular products, allocate the costs based on previous unit sales. Fixed Costs Vehicle X 0 Vehicle Y Vehicle Z c. Use your calculations of fixed costs and dealer invoice to compute break-even units for each vehicle. Break-Even Units 0 Vehicle X units 0 Vehicle Y units 0 Vehicle Z units

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Break-Even Analysis
The general formula for calculating break-even units is
Break-even Units = Total Fixed Costs / (Unit Selling Price - Unit Variable Cost)
In StratSim total fixed costs can be broken into discretionary marketing expenditures as well as fixed costs for plant and
overhead. The selling price is the MSRP less the dealer discount, and the cost of materials and labor make up the variable cost. In
this assignment you will allocate fixed costs across a portfolio of products and calculate the break-even units for each product.
A firm's production capacity is 1.4 million units, with annual fixed costs of $2.2 billion for depreciation, plant maintenance,
corporate marketing, and general overhead. Additional values for the three vehicles produced and sold by the firm are shown in
the table below:
Vehicle X
Vehicle Y
Vehicle Z
MSRP
$11,800
$19,000
$44,300
Dealer Discount
8%
13%
14%
Variable Cost
Advertising & Promotion
$8,300
$11,600
$27,900
$38,000,000 $74,000,000
$99,000,000
Previous Unit Sales
500,000
400,000
300,000
QUESTION 1
a. Calculate the manufacturer's price to dealer (dealer invoice) for each product.
Dealer Invoice
$ 0
Vehicle X
Vehicle Y
$ 0
Vehicle Z
b. Calculate the fixed costs for each product. For fixed costs that are not directly attributable to particular products, allocate the costs based on previous unit sales.
Fixed Costs
$ 0
Vehicle X
$ 0
Vehicle Y
Vehicle Z
c. Use your calculations of fixed costs and dealer invoice to compute break-even units for each vehicle.
Break-Even Units
0
Vehicle X
units
0
Vehicle Y
units
0
Vehicle Z
units
Transcribed Image Text:Break-Even Analysis The general formula for calculating break-even units is Break-even Units = Total Fixed Costs / (Unit Selling Price - Unit Variable Cost) In StratSim total fixed costs can be broken into discretionary marketing expenditures as well as fixed costs for plant and overhead. The selling price is the MSRP less the dealer discount, and the cost of materials and labor make up the variable cost. In this assignment you will allocate fixed costs across a portfolio of products and calculate the break-even units for each product. A firm's production capacity is 1.4 million units, with annual fixed costs of $2.2 billion for depreciation, plant maintenance, corporate marketing, and general overhead. Additional values for the three vehicles produced and sold by the firm are shown in the table below: Vehicle X Vehicle Y Vehicle Z MSRP $11,800 $19,000 $44,300 Dealer Discount 8% 13% 14% Variable Cost Advertising & Promotion $8,300 $11,600 $27,900 $38,000,000 $74,000,000 $99,000,000 Previous Unit Sales 500,000 400,000 300,000 QUESTION 1 a. Calculate the manufacturer's price to dealer (dealer invoice) for each product. Dealer Invoice $ 0 Vehicle X Vehicle Y $ 0 Vehicle Z b. Calculate the fixed costs for each product. For fixed costs that are not directly attributable to particular products, allocate the costs based on previous unit sales. Fixed Costs $ 0 Vehicle X $ 0 Vehicle Y Vehicle Z c. Use your calculations of fixed costs and dealer invoice to compute break-even units for each vehicle. Break-Even Units 0 Vehicle X units 0 Vehicle Y units 0 Vehicle Z units
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education