Share
Explore BrainMass

Case Study: Bremen Electronics-Breakeven Analysis

1) What would breakeven sales volume be, assuming a ratio of two RC1s sold for each RC2 sold
2) What level of sales would provide the target profit specified by the parent company of $210,000 for the year? (Assume that they sell all that they produce)
3) What would the manufacturing cost per unit be if they made and sold only 8,000 of RC1 and 4,000 of RC2s per month? In that case what would the profit be?
4) What would be the profit if they sold 8,000 RC1 and 4,000 RC2 (as in question 3) but produced 10,000 of RC1s and 5,000 of RC2s , putting the unsold units in the finished goods inventory?

See the attached file for the complete case.

Attachments

Solution Preview

see attached file

Proportion = 2/3 1/3
RC1 RC2
Selling price $20.00 $23.00

Variable Cost
Parts $5.50 =55000/10000 $6.40 =32000/5000
Direct Labor $3.50 =35000/10001 $4.20 =21000/5001
Total Variable cost= $9.00 $10.60

Contribution per unit= $11.00 =$20.-$9. $12.40 =$23.-$10.6

Contribution for the sales mix= $11.47 =$11.* 2/3 +$12.4* 1/3

Manufacturing overhead= $112,000
Selling and administration= $40,000
Total Fixed expense= $152,000

Break even units= 13252 =$152000./$11.47

out of which
RC1= 2/3 = 8,835
RC2= 1/3 = 4,417
13,252

Check:

RC1 RC2 Total
No of units 8,835 4,417 13,252
Sales revenue= $176,700 =$20.*8835 $101,591 =$23.*4417 278,291

Variable cost:
Parts $48,593 =$5.5*8835 $28,269 =$6.4*4417 76,862
Direct Labor $30,923 =$3.5*8835 $18,551 =$4.2*4417 49,474
$79,516 $46,820 126,336

Contribution 151,955

Manufacturing Overhead= $112,000
Selling and administration $40,000
Total fixed cost= $152,000

Profit= -$45
(The profit is coming out to be -$45
It should have been $ 0; the difference is because of rounding off error)
At breakeven point profit=0

Contribution margin of the sales mix= $11.47

Manufacturing Overhead= $112,000
Selling and administration $40,000
Total fixed cost= $152,000

Profit for the ...

Solution Summary

Answers questions on breakeven analysis from Case Study: Bremen Electronics.

$2.19