...Hallstead Jewelers Case 1. According to the Exhibit 1 provided in the case, we set up new income statement for 2003, 2004 and 2006 (see exhibit a). The variable cost includes cost of good sold and commissions, and the fixed cost cover other things include selling expense, salaries, advertising, administrative expenses, rent, depreciation, and miscellaneous expenses. Then the brief result shows in the table below. | 2003 | 2004 | 2006 | Break-even point in dollars (in thousand of dollars)= Fixed cost/contribution margin ratio | $7,287.03 | $7,620.20 | $11,655.34 | Break-even point in units (sale ticket)= Break-even point in dollar/Sales per tickets | 4535 | 5000 | 7506 | Margin of Safety= (Budgeted sales - Break-even point sales)/Budgeted sales | 15.10% | 5.95% | -8.82% | (Table 1. All the related data can be found in exhibit a.) Both the break-even point in dollars and the break-even point in units increase a lot, and the margin of safety drops down to negative in 2006. The changes were caused by the huge increase in fixed cost (especially the rent since the bigger place they moved to in 2005). 2. If average prices were reduced ten percent and the number of sales tickets increased to 7500, the company’s income would be a net loss as $(1,109,410). And new breakeven point in sales would be 9633, and the new breakeven point in dollar would be $13,463,440. The income statement would be in the exhibit b. | Net Income/loss(Thousand of dollars) | Break-even...
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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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...Hallstead Jewelers Case 1. The breakeven point in number of sales tickets between 2003 and 2004 went up from 4,535 to 5,000. In terms of sales dollars it increased from 7,287,745 to 7,620,000. This happened because while variable costs actually went down, their average sales ticket went down by 83 which caused them to have to sell more to break even. The breakeven point from 2004 to 2006 went up from 5,000 to 7,509. Breakeven in terms of sales dollars increased from 7,620,000 to 11,661,477. Though the average sales ticket went up some, it was not enough to cover the increase in variable and fixed costs which were probably caused by the move of location. Margin of Safety between 2003 and 2004 decreased from 1,295,255 to 482,000. Because the average sales ticket went down so much while sales remained relatively the same, they did not make enough profit to keep the same margin of safety. Between 2004 and 2006 margin of safety went down from 482,000 to –950,477. Sales tickets between these two years went up significantly, but it was not enough to cover the large increase in fixed and variable costs. This caused them to be well below the break-even in sales dollars. 2. If the average sales ticket was reduced to 1,398 and sales tickets were increased to 7,500, income would actually decrease from -406 to -1,112. The new break-even point in sales units would be 9,780, and the new break-even in sales dollars would be 13,672,440. 3. All else consistent in...
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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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...Hallstead Jewelers How has the breakeven point in number of sales tickets (number of customer orders written) and breakeven in sales dollars changed from 2003 to 2004, and to 2006? How has the margin of safety changed? What caused the changes? The break-even point in the number of sales tickets for 2003, 2004, and 2006 are 4,535, 5,000, and 7,505 respectively. The break-even point in sales dollars for 2003, 2004, and 2006 are $7,287,043, $7,620,696, and $11,655,277 within these years. The margin of safety is the difference between the expected level of sales and break-even sales. Since there is no expectation of sales mentioned in the case report, a constant level of expected sales is assumed. If the expected level of sales remains constant, the break-even sales point will increase as the margin of safety decreases. Within these years, the margin of safety changed from 15%, 6%, to -9%. As shown in Table 1, fixed costs increased along with the break-even sales point and sales did not meet expectations, therefore the company reported a loss in 2006. This was caused by an increase in salaries (larger storage room), administrative expenses, miscellaneous expenses, depreciation (increase in assets from the larger store), and rent expenses (new store); which all caused an increase in fixed costs and break-even sales. Table 1: Break-even Sales Calculations (thousands of dollars) 2003 2004 2006 Sales $8,583 $8,102 $10,711 Less variable costs: Cost of goods...
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...Hallstead Jewelers (Case Study1) Accounting 2301 Managerial Accounting Professor May Spring 2013 By: Madhur Mittal, Ishaq Rehman, Ying Wang and Bohan Li Question 1 Breakeven is a point at which a company covers all its costs and its profit is zero. After reviewing Hallstead Jewelers Income Statement, operational statistics, and table 2 and 3, for fiscal years 2003, 2004, and 2006, we can see a slight change in the breakeven unit and dollar amounts between the fiscal year of 2003 when compared to 2004. At the same time we also examine a major change when comparing the breakeven points of the fiscal year 2004 to 2006. This can be seen in Tables 1, 2, and 3. Hallstead Jewelers | Income Statement | For the years 2003, 2004, and 2006 (In thousands) | | 2003 | 2004 | 2006 | Total Sales | $8,583 | $8,102 | $10,711 | Variable Costs | | | | Cost of Goods Sold | $4,326 | $4,132 | $5,570 | Commissions | $429 | $405 | $536 | Total Variable Costs | $4,755 | $4,537 | $6,106 | Contribution Margin | $3,828 | $3,565 | $4,605 | | | | | Fixed Costs | | | | Salaries | $2,021 | $2,081 | $3,215 | Advertising | $254 | $250 | $257 | Administrative Expenses | $418 | $425 | $435 | Rent | $400 | $400 | $750 | Depreciation | $84 | $84 | $142 | Miscellaneous Expenses | $53 | $93 | $122 | Total Fixed Costs | $3,230...
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...Hallstead Jewelers was one of the largest jewelry and gift stores in the United States for 83 years. Customers came from throughout the region to buy from extensive collections in each department. Any gift from Hallstead’s had an extra cache attached to it as they were known for having the best. Even though the principal retail shopping areas shifted two blocks west, Hallstead’s reputation and selection still brought in customers. In 1999 however, sales became stagnate and profits were starting to slip. The owners (two sisters, Gretchen and Michaela) made several changes in an effort to revitalize the store back to its full glory. The largest decision they made was to move the stores location, expanding it by 50% more space and selling staff. This move resulted in a five-year lease as well as extensive and expensive renovations. They also made some changes in product offerings and offered more sales potential at the cost of minor reductions in margins. During the year it took to complete the Hallstead’s renovation the industry started showing major changes toward internet based jewelry sales. Tiffany & Company, a business with an origin much like Hallstead Jewelers, grew into an international powerhouse. At the same time, a start-up internet seller, Blue Nile, became the second largest diamond seller in the U.S. While Hallstead’s was growing their fixed costs by doubling their rent payments, Tiffany and Blue Nile were increasing their revenue with...
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...Hallstead Jewelers Case TEAM B Michelle Dragoo, Michael Depaolis, Rashad Harrison, Amy Grammer, Kelly Graham Florida Institute of Technology Managerial Accounting – BUS 5431 RECOMMENDATION The Company should eliminate the sales commissions paid to their sales clerks and replace it with an incentive program that ties the employees’ bonus to the company’s performance. Michaela’s suggestion on spending $200,000 more on advertising should be considered because the store has moved to the new place and advertising is necessary to inform the loyal customers and bring new clientele in. Hallstead Jewelers should strengthen their name by differentiating their products and start entering the World Wide Web retail business. CONCLUSION The rise of sales tickets reported in 2006 indicates that moving to the new location was a good decision. However, the rent has doubled and some of the fixed costs have gone up as well. The company needs to drive the sales up and differentiate themselves from their competitors. Effective advertising could help the company to break-even in 2007 and make a profit in years to come. RESULTS Significant points from the case: • In a new building just renovated in 2005, with 50% more space and selling staff than ever before, the business had experienced a loss almost double the income of the last “normal” year • The principal retail shopping areas shifted two blocks west of Washington St. •...
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...Due Date: 24th May 24, 2016 Hallstead Jewelers Professor James Reagan Carly Cugine Fernando Morey Perez Olivia Hajas Uday Saha Yineng Zhang Part 1 **In Thousands** Variable Costs | 2003 | 2004 | 2006 | Sales Ticket Units | 5341 | 5316 | 6897 | Average Sales Ticket | 1607 | 1524 | 1556 | Sales | 8583 | 8102 | 10711 | Variable costs | | | | COGS | (4326) | (4132) | (5570) | Commission | (429) | (405) | (536) | Total Variable Cost | (4755) | (4537) | (6106) | Total Contribution Margin | 3828 | 3565 | 4605 | Contribution Margin Per Unit | .7167 | .6706 | .6677 | 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...
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...Index 1. Income statement (Contribution Margin) | | 2008 | | | 2009 | | | 2011 | | 10,153 | Per Unit | Budgeted Amount | 9,967 | Per Unit | Budgeted Amount | 13,063 | Per Unit | Budgeted Amount | Sales | $815 | 8,279,000 | | $814 | 8,117,000 | | $816 | 10,656,000 | VC | $468 | (4,750,000) | | $467 | (4,654,000) | | $467 | (6,106,000) | CM | $347 | 3,529,000 | | $347 | 3,463,000 | | $349 | 4,550,000 | FC | | $(3,230,000) | | | $(3,333,000) | | | $(4,921,000) | NI | | $299,000 | | | $130,000 | | | $(371,000) | Break-even point in units and dollars | | 2008 | 2009 | 2011 | Break-even point (Unit) | 3,230,000/347=9,308 | 3,333,000/347=9,605 | 4,921,000/349=14,100 | Break-even point (Dollar) | 9,308*815=$7,586,020 | 9,605*814=$7,818,470 | 14,100*816=$11,505,600 | Break-even point (Unit)= Fixed cost/Contribution Margin per unit Break-even point (Dollar)= Break-even point (Unit) x Sales per unit Margin of safety (%)= (Budgeted sales – Break-even sales)/Budgeted sales Margin of safety (%) | | 2008 | 2009 | 2011 | Margin of safety (%) | (8,279,000-7,586,020)/8,279,000= 8.4% | (8,117,000-7,818,470)/ 8,117,000= 3.7% | (10,656,000-11,505,600)/10,656,000= -8.0% | Index 2. New Income statement (Contribution Margin) | | 2008 | | | 2009 | | | 2011 | | 13,800 | Per Unit | Budgeted Amount | 13,800 | Per Unit | Budgeted Amount | 13,800 | Per Unit | Budgeted Amount | Sales | $774 | 10,681,200 | | $773 | 10,667,400...
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...Hallstead Jewelers – Individual assignment ACCT 503 – NMSU – Mills – Spring, 2016 When I lived in San Antonio, I was a loyal customer to James Avery Jewelers [ http://www.jamesavery.com/ ]. I believe the company demonstrates how a jeweler can adapt and grow over decades by changing product lines, expanding on line, etc. You might find the website informative about the history of the company, types of product, and ways to market that could help you spice up this case. Maximum points: 100 points Objectives: ➢ Perform breakeven analysis ➢ Practice using Excel spreadsheets ➢ Reinforce writing and critical thinking skills Required: Read the Hallstead Jewelers case published by Harvard Business School. Within this document, after each question, double space and begin your response (single-spaced). Double-space before you begin the next question. Place the answers only in the space provided. Save this document with a filename that shows your last name, first name, and Halstead, course and semester (e.g. Mills_Sherry_Hallstead_503_Sp16). Work your calculations using the excel spreadsheet that I have provided you. Copy and paste special as a picture, your work into this Word document after the appropriate question. Also, save the excel file with a filename that shows your last name, first name, Hallstead, course and semester. Attach your Word and Excel files in the Canvas assignment dropbox. In order to receive full credit, use excel to make the...
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...Aussie pies Anna Amphlett and Andrew Ferris has decided to startup a new business in Seattle, U.S.A under the name of Aussie Pies Inc. after their visit to Australia; where they discovered the meat pies, the national snack food of Australia and interested in starting up a business in U.S to produce and sell similar meat pies, The couple has decided to apply for a loan through a contact to establish a new business. Even though bank has tentatively agreed to provide the loan up to one million with 6% interest per year, still loan committee of the bank require business plan including complete set of projected financial statements for the first year of operations, including income statement, statement of cash flow and balance sheet. Please see the detail of the company from below report, The company Anna Amphlett and Andrew Ferris have discovered the meat pies, the national snack food of Australia, during their visit to Sydney. They found Australian consumed vas number of meat pies during sporting events and other occasions and pies are served with ice-cold beer. They decided to explore the possibility of establishing a business in USA. They have decided to locate the first outlet in Pike Place Market, a popular destination for tourist to Seattle in USA, particularly International travelers who curious about other cuisines and willing to try new foods. They have decided to make the pies with high-quality, low fat due to most international travelers belong to...
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...2004, Hallstead resided in their previous location which held 10,230 square feet. Between these years, there is an increase in their break-even point, but this change can be associated with a down year in sales. Their sales decreased by approximately $481,000. Along with that, we can see that Hallstead’s fixed costs remained stable, only increasing by $103,000. The year to focus on is the change in Hallstead’s location when they moved to a new store with 5,050 more square feet. With this change, their fixed costs rose immensely, and they failed to account for a necessary change in advertising. Hallstead was running their business in the same manner they did during their years in the smaller store. The margin of safety in 2003 was 20.35%. In 2004, this decreased to 8.71%, and the margin of safety for 2006 was – 7.82%. This value for 2006 is insignificant because they lost money. The margin of safety quantifies the cushion in percent of sales the firm has before they reach the break-even point. 2. While this idea may seem appropriate to put Hallstead on track, it is in fact a poor decision as net income decrease even more. The net income in this case would a negative value at - $1,124,160. The break-even point would increase to 15,507 units sold, and the break-even point in sales dollars would increase to $13,551,567.30. 3. This idea would not only decrease the break-even point in units sold to 10,662 units but it would also create a positive net income for Hallstead...
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