Breeden Electronics USA is a new venture of a German firm. It aims to manufacture two goods, both being technical signaling devices. Herman Klein, the unit's president, has demanded of his manager, Marlene Baer, to calculate different break-even sales numbers as they evaluate the sales amount that is required to match with the revenue generation goal set by the mother company. Baer needs to carry out a number of different break-even analyses and take into account the effect on revenues if manufactures more than the sales. This is the initial of the two cases that can be utilized to understand how the cost systems developed and structured. The primary problems defined in both the cases are: in the A case, the firm makes use of conventional costing system. The core questions are about breakeven analysis and the impact of inventory stocking on revenue generation abilities. The B case (UV1779) brings to light the utilization of an activity-based costing system to distribute costs in order for the firm to review the attractiveness of the product as well as the customer. The two case studies may be discussed in two different classes or in a single class together.
2008 monthly budget
Total contribution for 2 RC1 and 1 RC2
Breakeven (2 RC1 and 1RC2 units)
Target Profit Analysis
Total contribution for 2 RC1 and 1 RC2 ($)
Manufacturing cost per unit
1. What would the Break-even sales volume be, assuming ratio of two RC1s sold for each RC2 sold?
2. What level of sales would provide the profit target specified by the parent company of $210,000 for the year? (Assuming that they sell all that they produce)
3. What would be the manufacturing cost per unit if they made and sold only 8000 RC1 units and 4000 RC2 units per month? In this case, what is the profit?
4. What would profit be if they sold 8,000 RC1 units and 4,000 RC2 units (as in the previous Question) but produce 10,000 RC1 units and 5,000 RC2 units, putting the unsold units in the finished goods inventory?