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San Jose Motor

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Submitted By hannah901226
Words 1832
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San Jose Motors
San Jose Motors is a small company that produces motors for specialized equipment sold primarily to research laboratories and a major U.S. defense contractor. The operation is family owned and has been in business for 15 years. The company produces and sells three motors, named Motor 5, Motor 10, and Motor 15.

Bob Noonan was recently hired as an accountant and reports to the controller, Jennifer Mackey. Bob has been performing routine types of accounting work, but he would like to become more involved in cost control and in analyses to help the managers make decisions. Recently, he performed a cost-volume-profit analysis of the company’s three products, as shown below. The analysis was based on data from last year’s accounting records.

Prior Year Data | | Aggregate | Motor 15 | Motor 10 | Motor 5 | Sales at capacity (units) | 300,000 | | | | Actual volume (units) | 250,000 | 120,000 | 80,000 | 50,000 | Price per unit | $113.60 | $140.00 | $120.00 | $40.00 | Total revenue | $28,400,000 | $16,800,000 | $9,600,000 | $2,000,000 | Variable cost per unit | $85.60 | $125.00 | $62.50 | $28.00 | Total variable cost | $21,400,000 | $15,000,000 | $5,000,000 | $1,400,000 | Fixed costs | $6,000,000 | $900,000 | $4,500,000 | $600,000 | Operating profit | $1,000,000 | $900,000 | $100,000 | $0 | Ratios: | | | | | Variable cost to sales | 75.352% | 89.286% | 52.083% | 70.000% | Contribution margin ratio | 24.648% | 10.714% | 47.917% | 30.000% | Utilization of capacity | 83.333% | 40.000% | 26.667% | 16.667% | Breakeven point: | | | | | Units | 214,286 | | | | Revenues | $24,342,857 | | | |

Total Revenue
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Bob asked Jennifer for an opportunity to present his CVP analysis at the next weekly managers’ meeting. Jennifer had used CVP in the past, but had not formally

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