...For Case 3-1: answer questions 1 - 5. 1. Breakeven Volume Analysis Varible costs Medical Supplies: $493,806 Purchased Laboratory Services: $24,476 Water Usage: $20,896 Total Variable Costs: $539,178 Number of treatments: 5,736 Total Variable Cost / Number of treatments $539,178 / 5,736 = 94 Px = a + bx $250x = $510,870 + 94x $156x = $510,870 ($156x = $510,870)/$156 = 3274.81 3274.81 treatments per year 7 nurses -1 $35,000/7 = $5,000 bi-monthly / 2 = $2,500 monthly ($2,500 monthly)12 = $30,000 per year 7 techs -1 $30,680/7 = $4382.86 bi-monthly(2 Employees)/ 2 = $4382.86 monthly ($4382.86 monthly)12 = $52,594.29 per year $30,000 per year + $52,594.29 per year = $82,594.29 per year total payroll last year = $436,800 $436,800 - $82,594.29 = $354,205,71 projected payroll with 3 less employees $354,205.71/$436,800 = 81.1% of previous years payroll expenses Assumptions: Medical Supplies: $493,806 Purchased Laboratory Services: $24,476 Water Usage: $20,896 Are variable expensed and Depreciation is a fixed expense 2. Fair Share of Overhead: @ 50% Capasity 120 Treatments per week / 2 = 60 Treatments per week (60 Treatments per week)(52 weeks in a year) = 3120 Treatments per year @ 50% Capacity Treatments per year @ 50% Capacity / Number of treatments last year: 5,736 = 3,120/5,736 = 54.4% Fixed Overhead; Depreciation, Operation of Plant, Housekeeping $4,778 + $4,281 + $3,411 = $12,470 Variable per treatment: Laundry and Linens...
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...1. Analyze Aquarius with respect to the five contextual variables. How would you describe the environment, goals, culture, size, and technology for Aquarius? According to the case, the environment of Aquarius Advertising Agency is not very stable, which is mainly because other agency specialists avoiding the Account Executives. The goals of Aquarius Advertising Agency are to be creative, imaginative, resourceful but yet unique and to please their customers, and do it better than any other companies can and possibly gain more customers. Today, the culture is changed every day, so the turnover that Aquarius has experienced is a fact of the fast-changing trend; researchers must find better ways to present thoughts that customers would like to accept. The technology is mainly non-routine, because of the emphasis on originality and art. 2. Design a new organization structure that takes into consideration the contextual variables in the case and the information flows. As I see it, the mixture form of structure would be one specific possibility, with account executives reporting to customer group vice-presidents, and most functional departments such as research, media, merchandising, copy department and art department reporting to each of the account executives. The functional heads that would still report directly to the president would probably be legal counsel, finance, and personnel. The structure matches the uncertainty of the environment, and would enable the organization...
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...Taco Restaurant Breakeven Analysis November 29, 2015 _ Scenario The problem states that the average order price at a local taco restaurant in Lynchburg, VA is $7.00 per order. The variable costs including food and paper products are $3.00 per order. The fixed costs are $5,600 a month (building lease, electricity, and labor). Breakeven Formula Analysis At this rate, the restaurant requires at least 1,400 orders a month to reach the breakeven point. However, as the problem states, the restaurant is barely making 1,000 orders per month. This means that the restaurant may not last long at this rate and measures must be taken to increase sales and decrease expenses. _ Marketing Plan The obvious solution is to increase the orders per month from 1,000 to 1,400. However, because of factors such as competition, this may be difficult to do in a short period of time. I suggest increasing the average order price to $8 by slightly raising prices, and offering customers discounts for purchasing more food with a lower variable cost (i.e nachos, fries, or anything that doesn't cost much to make). A pricing constraint to consider would be the price that customers are willing to pay for your food may not be extremely high depending on the quality of the restaurant. Then, it would be advantageous to decrease the variable costs to $2.50 by purchasing certain food items in bulk if possible. Next, it may...
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...Introduction Columbia Memorial Hospital is an acute care hospital with 300 beds and 160 staff physicians, and is one of 75 hospitals owned and operated by Health Services of America, a for profit, publicly owned company. In addition, Columbia Memorial operates an emergency room and stand-alone walk-in clinics. Currently, 8,000 of these walk-in clinics exist around the country. Because of Columbia’s profitability, the other three hospitals in the area opened walk-in clinics as well, thereby increasing Columbia Memorial’s competition. Due to the increased competition, there are only three clinics left in the city, down from the original five. The profitability of Columbia Memorial’s walk-in clinic is also in question as it is operating at only half of its capacity. In order to help the clinic become profitable once again, the marketing director, Rose Daniels, has presented a plan to implement a new campaign to the public to encourage use of the walk-in clinic. This proposed marketing plan would focus on occupational health services (OHS). “OHS would provide care to local businesses including physical examinations for managers and employees; treatment of illnesses that occur during working hours; and treatment of work-related injuries” (Gapenski, 51). Not only will the plan raise capacity in the clinic, but it will also lead to better overall health outcomes and prevent possible closure of the clinic threatened by the lack of profit generation. Columbia Memorial Hospital’s...
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...Beta company sells blouses in Washington, USA. Blouses are imported from Pakistan and are sold to customers in Washington at a profit. Salespersons are paid basic salary plus a decent commission on sales made by them. Sales and expense data is given below: Selling price per blouse $80.00 Variable expenses per blouse: Invoice cost $36.00 Sales commission $14.00 Total $50.00 Annual fixed expenses: Rent $160,000 Marketing $300,000 Salaries $140,000 Total $600,000 1. Compute the number of units to be sold to break-even. 2. Prepare a CVP graph (break-even chart) and show the break-even point on the 3. If the manage is paid a commission of $6 blouse (in addition to the salesperson’s commission), what will be the effect on company’s break-even point? 4. As an alternative to (3) above, company is thinking to pay $6 commission to manager on each blouse sold in excess of break-even point. What will be the effect of these changes on the net operating income or loss of the Beta company if 23,500 blouses are sold in a year? 5. Refer to the original data. What will be the break-even point of the company if commission is entirely eliminated and salaries are increased by $214,000? Should the company make this change? (1) Calculation of break-even point: Fixed expenses / Contribution margin per unit $600,000 / $30 20,000 units 20,000 units × $80 = $1,600,000 (2) CVP graph or break-even chart: ...
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...3/26/09 Case 4 Better Care Clinic (Breakeven Analysis) Fairbanks Memorial Hospital, an acute care hospital with 300 beds and 160 staff physicians, is one of 75 hospitals owned and operated by Health Services of America, a for-profit, publicly owned company. Although there are two other acute care hospitals serving the same general population, Fairbanks historically has been highly profitable because of its well-appointed facilities, fine medical staff, and reputation for quality care. In addition to inpatient services, Fairbanks operates an emergency room within the hospital complex and a stand-alone walk-in clinic, the Better Care Clinic, located about two miles from the hospital. Todd Greene, Fairbanks’s chief executive officer (CEO), is concerned about Better Care Clinic’s financial performance. About ten years ago, all three area hospitals jumped onto the walk-in-clinic bandwagon, and within a short time, there were five such clinics scattered around the city. Now, only three are left, and none of them appears to be a big money maker. Todd wonders whether Fairbanks should continue to operate its clinic or close it down. The clinic is currently handling a patient load of 45 visits per day, but it has the physical capacity to handle more visits—up to 60 per day. Todd has asked Jane Adams, Fairbanks’s chief financial officer, to look into the whole matter of the walk-in clinic. In their meeting, Todd stated that he visualizes two potential outcomes...
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...Fixed Variable and Break Even points David Anderson HSM/260 July 14, 2013 Melvin Green Fixed Variable and Break Even points Fixed Costs, Variable Costs, and Break-Even Point Part 1 During the sixth month of the fiscal year, the program director of the Westchester Home-Delivered Meals program decides to again recalculate fixed costs, variable costs, and the Break-Even Point using the high to low method. Included here are the number of meals served and the total costs of the program for each of the first six months: Month Meals Served Total Costs July (3,500) $20,500 August (4,000) $22,600 September (4,200) $23,350 October (4,600) $24,500 November (4,700) $25,000 December (4,900) $26,000 Recalculate fixed costs, variable costs, and the BEP. What are the variable costs? What are the fixed costs? How many meals will the WHDM program need to provide during the fiscal year to reach the BEP? How much profit will the program earn if it completes its 45,000-meal contract with the City of Westchester? Meals: High-Low= Cost: High-Low= The variable cost per meal: The variable cost for the low month: Fixed cost: (Monthly BEP) (Fiscal-year BEP) WHDM program profit analysis = meal contract Break Even Point (BEP) = 1,008 Revenue 1,008 Meals at Total Cost Per meal Total Profit = Exercise 10.2 It has been two years since the New River Community Council (NRCC) started its newsletter dealing with state and community...
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...I. Introduction Columbia Memorial Hospital is a 300-bed acute care hospital that employs 160 staff physicians. Columbia is one of 75 hospitals owned and operated by Health Services of America, a for-profit, publicly owned company. In addition to inpatient and outpatient services, Columbia operates an emergency department within the hospital and a stand-alone walk-in (urgent care) clinic two miles from the hospital and near a major shopping mall. Due to its superior facilities, outstanding staff and reputation for quality, individualized patient care, Columbia has remained highly profitable despite the presence of two other acute care hospitals serving the same population. 1,200 of the 8,000 walk-in clinics in the United States are affiliated with hospitals. These clinics enable patients to be examined and treated by urgent care physicians on evenings, weekends and without an appointment. Additionally, patient costs, which average between $60.00 and $200.00 per visit, and copayments associated with walk-in clinics are considerably less than costs associated with emergency room visits. Ten years ago, there were five walk-in clinics throughout the city. Now, only three clinics remain and none appear to generate significant profit. While the Columbia clinic has the capacity to see up to 85 patients per day, an average of only 45 patients are actually seen each day. II. Statement of the Relevant Issue Columbia’s Chief Executive Officer (CEO) Mike Reynolds...
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...Hallstead Jewelers Case Study Amanda Dutcher October 6, 2011 1) Fixed Costs=Salaries+Advertising+Administrative Expenses+Rent+Depreciation+Miscellaneous expenses Breakeven=Fixed Costs/Contribution Margin 2003-3230000/377.03=8,566.96 units 2004-3333000/357.68=9,318.39 units 2006-4921000/352.52=13,959.49 units Breakeven$=Breakeven Units*Unit Price 2003-8566.96*845=$7,239,079.12 2004-9318.39*812=$7,566,532.68 2006-13959.49*819=$11,432,822.31 Margin of Safety=Sales-Breakeven Sales 2003=8583000-7239079.12=1343920.88=15.66% 2004=8102000-7566532.68=535467.32=6.61% 2006=10711000-11432822.31=-721822.31=6.74% The breakeven point increases from year to year because of the increases in fixed costs. Because these costs are increasing, the company needs to produce and sell more units in order to cover them. The margin of safety decreases from year to year for the same reason. The change from 2003 to 2004 for breakeven units and the margin of safety were not nearly as significant as the change in 2006. This change in fixed costs is because they moved to a new, larger location causing them to increase dramatically. This caused for not only an increase in rent, but also most likely an increase in the amount of employees. This major increase in fixed costs is what caused the major change in both the breakeven point and the margin of safety. 2) New Price=$737.10 New Sales Volume=14,0000 Sales=$10,319,400 $10,319,400-10,711,000=$-391,600 The decrease in price also causes...
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...JET2 - Financial Analysis - Task 4 JET2 – Task 4 A1. Costing Method Costing is used in business accounting strategies as a way of determining cost of manufacturing a product in relation to the revenue generated by that product. Costing systems determine the overhead of production and then allocate those overhead costs to a business’s product. There are two common methods for allocating these indirect costs to products, traditional costing and activity based costing. Both of these methods assess overhead costs and then attach these costs to products based on certain cost drivers, “a factor that causes cost to incur, such as machine hours, direct labor hours and direct material hours (Johnson 2014).” The first of these methods is Traditional Costing. This costing method drops all overhead costs into one bucket and then disperses them across three drivers, units produced, labor, and machine hours. Although this method works well for lines that are similar and consistent, one of its drawbacks is that this method does not account for customization requirements and overall complexity of the lines. So the company ends up allocating the same cost drivers across all production lines. The second method is Activity Based Costing. Activity based costing on the other hand, utilizes multiple cost pools as it relates to overhead costs based on resources used. Overall, this is a better cost system methodology for the company as it allows for the customization and specialty line...
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...considering our breakeven point. Therefore I’m made this report to underline the importance of a good projected income statement. I’ve stated the problem analyses and the consequences of this error. Also I’ve placed my recommendations in this report. As you can see in appendix 1, there’s a big difference in our projected income statement and our income statement based on our actual sales. The deviation of our sold products is different than stated in our projected income statement. Instead of the sales deviation of 48% Sinks, 20% Mirrors and 32% Vanities. Our actual sales deviation of this month is 32% Sinks, 40% Mirrors and 28% Vanities. Because there are differences in the contribution margins of the three products, this has lead to a lower total contribution margin than stated in the projected income statement. Nevertheless we’ve reached our sales of $500,000 we didn’t reach our projected operating income of $36,400. Unfortunately we’ve made a operating loss of $8,600. This is due to the fact that our projected income statement was not accurate enough regarding our total contribution margin. Instead of our projected contribution margin of 52% our real total contribution margin is 43%. I recommend that because of this difference, we also have to change our breakeven point in total sales dollars. As you can see in appendix 1, our breakeven point in total sales shouldn’t be $430,000 but instead of that it should be $520,000. The difference between the two breakeven points are...
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...The breakeven point in units and in sales dollars has increased each year from 2003 to 2006 (with the renovation year of 2005 having been skipped). From 2003 to 2004, breakeven increased by 10.28% in units and 4.58% in dollars. These increases occurred because, while variable costs decreased by 4.58%, average ticket (unit) price decreased by 5.16%, meaning Hallstead was getting a lower contribution margin per ticket/unit. Fixed costs also slightly increased from 2003 to 2004, which in turn contributing to increasing breakeven point. Breakeven increased drastically from 2004 to 2006, increasing by 50.07% in units and 52.93% in dollars. The biggest reason for this is the massive increase in fixed costs. Particularly salaries, which increased by $1.134 million from 2004 to 2006 (54% increase from 2004 to 2006) and rent, which doubled from 2004 to 2006, increasing by $420,000. In this case, margin of safety indicates how much sales did Hallstead actually make above breakeven level, instead of using a budgeted or expected sales value. For 2003, if Hallstead’s sales were 15.09% lower, they would have been at exactly breakeven sales level. Margin of safety decreased significantly from 2003 to 2004, because Hallstead’s sales decreased while its breakeven point increased. Margin of safety continued to drastically decrease from 2004 to 2006 and was actually negative in 2006, meaning they needed to make 8.82% more in sales to have reached breakeven. This occurred because, even though their...
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...fare x 100 Fixed operating cost per month $3,150,000 Breakeven point in passengers 35,000 Breakeven point in passengers = Fixed operating cost per month / Contribution Margin per passenger Breakeven point in revenue $5,600,000 Breakeven point in revenue = Fixed operating cost per month / Contribution Margin ratio B: Breakeven point in passengers per month 35,000 Number of seats per passenger train car 90 Total train car needed 388.89 Total Cars Needed = Breakeven point in passengers per month / Number of seats per passenger train car At Average load factor (percentage of seats filled) 70% Break-even point in number of passenger train cars per month 556 Break-even point in number of passenger train cars per month = Total train cars needed / Load factor C: Average full passenger fare $190 Less: Average variable cost per passenger $(70) Contribution Margin per passenger $120 Contribution Margin = Per Passenger fare - Variable cost per passenger Contribution Margin ratio 63.16% Contribution Margin Ratio = Contribution Margin Per Passenger / Average full passenger fare x 100 Fixed operating cost per month $3,150,000 Breakeven point in passengers 26,250 Breakeven point in passengers = Fixed operating cost per month / Contribution Margin per passenger Number of seats per passenger train car 90 Total train car needed 291.67 Total Cars Needed = Breakeven point in passengers per month / Number of seats per passenger...
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...Fixed Cost | 2003 | 2004 | 2006 | Salaries | 2021 | 2081 | 3215 | Advertising | 254 | 250 | 257 | Administrative Exp | 418 | 425 | 435 | Rent | 420 | 420 | 840 | Depreciation | 84 | 84 | 142 | Misc. | 53 | 93 | 122 | Total | 3250 | 3353 | 5011 | Breakeven analysis: For this part of the case study we used the following formulas to get Breakeven in units and Breakeven sales. The calculations can be found below and are in thousands of dollars. * Breakeven # of tickets = total FC / (selling price per ticket - VC per ticket) * Breakeven in sales dollars = [total FC / (selling price per ticket - VC per ticket)] * (selling price per ticket) or total FC/ CM ratio * Margin of Safety = Expected Sales - Breakeven in Sales Dollars Results | 2003 | 2004 | 2006 | Break even # units | 4,535 | 5,000 | 7473 | Break even sales dollars | 7,323.994 | 7,606.797 | 11,495.82 | Margin of Safety | 1259 | 495.2 | (1259) | Calculations 2003 Breakeven Units: FC (3250) / CM (.71672) = 4,534.546 Breakeven sales: Total FC (3250) / CM ratio (.44375) = $7,323.944 Margin of Safety: Sales (8,583) - Breakeven Sales (7,323.994) = 1259 2004 Breakeven Units: FC (3353) / CM (.6706) = 5000 Breakeven sales dollars: Total FC (3353)...
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...JET2 – Task 4 Financial Statement Analysis Managing Internal Cost & Controlling Finances Summary Report In response to a request from the Vice President of Competition Bikes for an analysis and recommendation regarding Activity Base Costing, as well as a request for a break-even analysis with projections of the company’s target profit, I have developed the following report. 1. Costing Method Evaluation Traditional Costing and Activity Based Costing (ABC) are the two systems we will evaluate in relation to Competition Bikes’ operations. To do so, we will need to look at the advantages and disadvantages of both systems. Costing systems are used to help predict the profitability of a product and help establish the cost of a product correlated to the income it generates. Traditional costing allocates overhead according to the amount of a particular cost driver, for example, how many direct labor hours are required to manufacture a product, while activity based costing looks at each activity and assigns a cost to it. Traditional costing separates costs into direct and indirect categories. The costs of labor or of raw materials would be examples of direct costs. Then, traditional costing divides the total cost of a product by the direct labor cost. This gives us the estimated cost of the product per item. However, increasingly in today’s business environment, the proportion of direct costs have fallen in relation to the proportion...
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