Contribution margin

HEALTHY SPRING WATER COMPANY PROBLEM 1a DEFINING THE PRICE-VOLUME TRADEOFF FOR A 20% PRICE INCREASE The Health Spring Water Company sells bottled water for offices and homes. The price of the water is $20 per 10 gallon bottle and the company currently sells 2,000 bottles per day. Following is a summary of the company’s income and costs on a daily basis. Sales Revenue $40,000 Incremental Variable Costs $16,000 Nonincremental Fixed Costs $20,000 Note: You can assume that

1. Contribution Margin Approach (used for similar products). 2. Contribution Margin Ratio Approach (used for substantially different products). Contribution Margin Approach Example: the contribution margin of product A is $8 and B is $5. Two units of B are sold for each unit of A. The Weighted Average Contribution Margin is $6.00. Contribution Margin Ratio Approach Example: the contribution margin ratio of product A is 20% and B is 50%. Two units

and pricing the products affordably, we can gain customers’ loyalty and awareness. Since our company’s main focus is premium products we will aim for high contribution margins, around 50%, on average, over all five products. After establishing our company brand and products within the market we will look to increase contribution margin to be between 55%-60% over all five products. Our company’s optimal balance is to have variable costs outweigh fixed costs unless our

Submitted by Yellow Team Eunice King Ronda Klassen Joshua Krupnick Larry McCraw Ronald Mills BUS 5431 Managerial Accounting Professor Nancy Shoemake April 18, 2010 1.0 Summary 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

Competition Bikes Inc. Storyline Managing Capital & Financial Assets 04/12/2014 WGU JET2 Financial Analysis Task 4 - PASSED To: Vice President The following is a summary report to recommend whether Competition Bikes should change its traditional costing method to activity based costing, and an analysis of the breakeven point with regards to sales units and dollars for both CarbonLite and Titanium bikes. It also discusses the impacts to the breakeven point. The cost-volume-profit evaluation

company 's contribution margin ratio? The company 's contribution margin (CM) ratio is determined as follows. CM ratio = CM ÷ Sales = (Sales – Variable expenses) ÷ Sales CM ratio = ($4,000,000 - $2,800,000) ÷ $4,000,000 = 30% -- Ashland Burglar Alarms Inc. sells a single product. The product has a selling price of $50 per unit and variable expenses of 80% of sales. If the company 's fixed expenses total $150,000 per year, then it will have a break-even point in sales dollars of:

required to contribute to a positive cash flow in the first operating year. In the case of the Lazy Mower Project the cash breakeven point comes to 2500 units. This is calculated by taking the fixed costs (including rent) and dividing by the contribution margin. ------------------------------------------------- 1,620,000/600=2700 The accounting breakeven point tells how many units the company must sell in year 1 to bring their operating income to zero. This takes into consideration the fixed costs

Current Profit: $ 2500 New Price per additional unit: 0 New Contribution Margin = New Price per unit – Variable cost per unit =$8.5-$2.5 =$6 New Sales unit @40% additional sales= 5000*40%= 2000 Additional profit @40% additional Sales = Additional Sales* New Contribution Margin =2000*6 =$12000 New Sales unit @20% additional sales= 5000*20%= 1000 Additional profit @20% additional Sales = Additional Sales* New Contribution Margin =1000*6 =$6000 Steady: Sales: 5000 Price per unit: $10

5) Illustrate how the break-even looks like and describe the usefulness of Break-even analysis and discuss some of the limitations of break-even charts Break-even analysis is a business tool widely used across all industries to evaluate business performance in terms of costs, since this is a supply-side analysis. Break-even analysis is an important aspect of a good business plan, since it helps the business determine the cost structures, and the number of units that need to be sold in order to

Issues for Discussion 1. What is the weighted average contribution margin (WACM) percentage for Bridgestone’s next annual budget? WACM = Contribution Average/Total Revenue WACM = $3,500,00/5,000,000 WACM = 70% 2. What does a high weighted average contribution margin (WACM) percentage mean for the management of Bridgestone? 3. Is Bridgestone able to plan for breakeven or a modest over-recovery of expenses (or profit) for the next year? If the center achieves breakeven or a modest