As a newly hired management accountant, you have been asked to prepare a profit plan for the company for which you work. As part of this task, you've been asked to do some what-if analyses. Following is the budgeted information egarding the coming year: Selling price per unit Variable cost per unit Fixed costs (per year) $ 100.00 63.00 1,227,327
As a newly hired management accountant, you have been asked to prepare a profit plan for the company for which you work. As part of this task, you've been asked to do some what-if analyses. Following is the budgeted information egarding the coming year: Selling price per unit Variable cost per unit Fixed costs (per year) $ 100.00 63.00 1,227,327
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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As a newly hired management accountant, you have been asked to prepare a profit plan for the company for which you
work. As part of this task, you've been asked to do some what-if analyses. Following is the budgeted information
regarding the coming year:
Selling price per unit
Variable cost per unit
Fixed costs (per year)
Required:
$ 100.00
63.00
1,227,327
1. What is the breakeven volume, in units and dollars, for the coming year?
2. Assume that the goal of the company is to earn a pretax (operating) profit of $332,001 for the coming year. How many
units would the company have to sell to achieve this goal?
3. Assume that of the $63 variable cost per unit the labor-cost component is $29. Current negotiations with the
employees of the company indicate some uncertainty regarding the labor cost component of the variable cost figure
presented above. What is the effect on the breakeven point in units if selling price and fixed costs are as planned, but the
labor cost for the coming year is 4% higher than anticipated? What if labor costs are 6% higher than anticipated? What if
labor costs turn out to be 8% higher than anticipated?
4. Assume now that management is convinced that labor costs will be 5% higher than originally planned when the budget
for the year was put together. What selling price per unit must the company charge to maintain the budgeted ratio of
contribution margin to sales? (Hint: Use the Goal Seek function in Excel to answer this question.)
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
Required 4
What is the breakeven volume, in units and dollars, for the coming year?
Break-even volume (units)
units
Break-even volume (dollars)
Required 1
Required 2 >
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