Purchase Solution

Two companies are rivals in the buggy whip industry

Not what you're looking for?

Ask Custom Question

Two companies are rivals in the buggy whip industry. Their manufacturing profiles are as follows:
Co. A Co. B
Unit Selling Price $ 300.00 $ 300.00
Manufacturing Cost/unit 50.0% 66.7%
Staff Salaries & Benefits 150,000 75,000
Advertising 50,000 25,000
Depreciation 40,000 15,000
Interest Cost 50,000 15,000
Other Fixed Costs 25,000 10,000

1. What is the breakeven unit sales for each company?
2. Company A has an investor that will pay off all of its debt and purchase equipment that will lower manufacturing costs by 10%. What is the new breakeven point for Company A? (no change to depreciation.)
3. What else can Company A do to lower its breakeven point to match that of Company B?

Purchase this Solution
Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
Recent Feedback
  • "Your explanation to the answers were very helpful."
  • "What does 1 and 0 means in the repair column?"
  • "Went through all of the formulas, excellent work! This really helped me!"
  • "try others as well please"
  • "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
Purchase this Solution
Free BrainMass Quizzes
Learning Lean

This quiz will help you understand the basic concepts of Lean.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Operations Management

This quiz tests a student's knowledge about Operations Management

Motivation

This tests some key elements of major motivation theories.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

View More Free Quizzes
Related BrainMass Solutions

  • Inventory-Rose Arena

    494631 Inventory-Rose Arena Rose Arena is the production manager for a manufacturing firm that produces buggy whips and other items. The annual demand for a particular buggy whip is 1,600 units. The holding cost is $2 per unit per year.

  • Sno-Top Adjusting Entries; ABC comparative income statement;

    The operating loss for the buggy whip division prior to disposal in 2007 is $50,000. ABC has a 40% tax rate.

  • country's production possibilities frontier and employment

    Meanwhile the new hi-tech or automotive industry can't find workers because they are all stuck in the typewriter, carbon paper, slide rule, buggy whip, etc. industries.

  • Negative Growth: Value of a share

    160745 Negative Growth: Value of a share Horse and Buggy Inc. is in a declining industry. Sales, earnings, and dividends are all shrinking at a rate of 10 percent per year.

  • Foundations of Financial Management.

    The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies--at least, that's the reasoning behind M&A.

  • Share Price

    216048 Horse and Buggy Inc. is in a declining industry. Sales, earnings and dividends are all shrinking at a rate of 10 percent per year. Horse and Buggy Inc. is in a declining industry.

  • industry's characteristics

    Rationales are included to assist in deciding between two different industries A or B: Industry A has 20 firms and a Concentration Ratio (CR) of 30%.

  • Strategy Metrics

    Whether it has more core competences than close rivals. b. Whether the firm's strategy is built around at least two of the industry's key success factors. c.

  • Cournot equilibrium outputs

    Find the new set of equilibrium outputs for these two rivals. b.) Find the industry price that is associated with these output levels. c.) Find the new profit level for each firm and for the industry. d.)

View More Related Solutions