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MEMO FOR BRIDGESTONE BEHAVIORAL HEALTH CENTER

To: Dr. Thomas Russell, Executive Director, Bridgestone Behavioral Health Center
From: Sheryl Marshall, Managing Director, Service Consulting Plus
Date: 7th September 2014
Subject: Analysis for decrease in financial performance
Dear Sir,
We really appreciate the services that your company is providing for the well being of the people. Bridgestone is doing a great work to help people tackle the problems that are faced by them and we thank you for choosing us to be part of your noble cause. Although the company is working effectively, it is not able to generate reasonable amount of profits. The profits it will generate in next year are also very small. But they can be increased if certain measures are taken and a check is kept on some factors which lead to decrease in profits.
The company is appearing to be barely in breakeven, which indicates lower profits. The weighted average contribution margin percentage for the next year is 70% and the breakeven dollar sales for the company are $4,991,000. The anticipated sales for that year is $5 million and thus the company will generate $9,000 more from sales than what is required to breakeven. When margin of safety is calculated in percentage it turns out to be about 0.18% since the sales revenue is $5,000,000. This is very low and is the reason for the very low profit margin for the year. A high weighted average contribution margin percentage will decrease the breakeven point and thus the sales over and above this breakeven point will give us more profit. It would also indicate a higher margin of safety because the breakeven point shifts to a smaller value and thus there is more room for the sales to fluctuate from the expected sales without crossing the breakeven point
Bridgestone has been able to plan for meagre profit of $6,300 for the next financial year and

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