Ask Business Management Expert

Forecasting revenue and costs

With the help of your chief financial officer (CFO), you have put together the following preliminary budget figures based on last year's numbers for a planned production and sales level of 4,000 units per month:

Building depreciation $200,000/yr.
Machine operators $100,000/yr.
Management staff $400,000/yr.
Direct materials $4,000,000/yr.
Other expenses that seem to vary based on production levels $3,000,000/yr.
Other expenses that don't seem to vary $1,300,000/yr.
Selling price per unit $5,000/unit

Utilities:
This category is difficult to analyze; a part of it is related to the building's heat and light, whereas a part of it is used in the manufacturing process itself. You have the following data to which you will apply the high-low method:

 When there is no production, utility costs are $20,000/month.

 When production levels reached 4,000 units/month, utility costs totaled $40,000/month.

You are planning for the future and working on a report based on data from last year's actual performance. You are going to use the breakeven formula to determine the business's breakeven point and to answer some important questions regarding your data.

Using only the data from last year's actual performance, write a report answering the following questions:

 Which of these 8 cost categories would be considered variable, and why?

 Which of these 8 cost categories would be considered fixed, and why?

 Which costs would be considered mixed (i.e., semivariable or semifixed)?

 Ignoring utility costs altogether, what is the contribution margin per unit, in dollars and in percentage?

 Ignoring utility costs altogether, what is the breakeven level of sales?

 Ignoring utility costs altogether, if instead of breaking even, the firm wants to make $10,000/month profit, answer the following:

o How many units must be sold each month?

o To how many sales dollars is this unit volume equivalent?

 In year 2, the chief executive officer (CEO) plans to add $300,000/year of expense in added administrative salaried head count. Ignoring utility costs altogether, how many additional units must be sold just to pay for this added expense?

 Utilities: How many dollars of the utility bill are fixed? What is the variable cost per unit of utilities?

Business Management, Management Studies

  • Category:- Business Management
  • Reference No.:- M9292156

Have any Question?


Related Questions in Business Management

Name a company that addressed a recent ethical problem in a

Name a company that addressed a recent ethical problem in a positive way. Also, explain how or if this positively affects us as a community?

When it is appropriate to use the trade-off process what

When it is appropriate to use the trade-off process. What conditions apply, and the technical evaluation criteria that might be used?

Need help with a essay with the following phrase for

Need help with a essay with the following phrase for analyzing : " Capitalism is at the heart of how people and organisations are managed in contemporary society" May i ask for a better explanation of the question? Also ...

How could these three tenets of the auburn creed be used to

How could these three tenets of the Auburn Creed be used to motivate others: "I believe that this is a practical word and that I can count only on what I earn. Therefore, I believe in work, hard work." "I believe in educ ...

How can these two tenets of the auburn creed by used in

How can these two tenets of the Auburn Creed by used in addressing teamwork issues: "I believe in honesty and truthfulness, without which I cannot win the respect and confidence of my fellow men." "I believe in the human ...

Discuss the advantages of having and interacting in a

Discuss the advantages of having and interacting in a diverse workplace. Consider the wide range of ideas and perspectives that a range of team members bring to a team, that are of differing ages, ethnic backgrounds and ...

Parmigiano-reggiano global recognition of geographical

Parmigiano-Reggiano: Global Recognition of Geographical Indications What historical factors have helped support the consortium's claims for the geographic specificity of Parmigiano-Reggiano and Parmesan? What are the eco ...

Communication planthis communication plan will be a roadmap

Communication Plan This communication plan will be a roadmap on how the new division will best be able to communicate with Biotech's corporate headquarters, suppliers, other divisions, and internally. This should lay out ...

Discuss strategies to obtain feedback from a customer and

Discuss strategies to obtain feedback from a customer and clients when working in sales.

Describe different networking methods and the advantages

Describe different networking methods and the advantages and disadvantages of them?

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As