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Breeden Security A Essay

1224 words - 5 pages

Breeden Security is a German Manufacturer of radio equipment with the mission of working with two subsidiaries in the Unites States. Breeden plan is to manufacture two products that proved success in Europe. Herman Klein, president, and Marlene Baer, controller of the division in United States are trying to plan for the upcoming year and have to challenge to budget the project and to present different scenarios to the parent company.
The first product mentioned is RC1 which has a better security than all the others in the market. For the production of this product, a manufacturer agreed to take at least 100,000 units which gave Klein and Baer the confidence target of selling 120,000 ...view middle of the document...

479
Levels of Sales Dollar= 1,782,000/.479 3,720, 250.552
By taking the weight of both products one can determine the level of sales for each one.
Level of Sales RC1= 3,720,250.552 X .67= 2,492,567.85
Level of Sales RC2= 3,720,250.552 X .33= 1,227,682.67
These figures tell the president that in order to reach the target profit the company needs to sell \$3,320,250.56. In terms of each product, the company needs to sell \$ 2,492,567.85 or 124,628 units of RC1 and \$1,227,682.67 or 53,378 units for RC2. After looking at these figures, it seems hard for the organization to accomplish this mission because they project year sales of 120,000 units for RC1 and according to the budget created by Baer they would not have enough supply for RC1.

Table 1.1

The next question that Klein wants to know is what is the break-even volume needed. In order to provide this answer the following formula must be applied.
2) Break-Even volume:
B.Ev = Fixed Expenses (12)/ TCM
B.Ev = 131,000 (12)/ 10.256 153,276.131 units
As extra information, one can calculate the break-even in dollar amount
B.E\$= Fixed Expenses (12)/CMR
B.E\$= 131,000 (12)/ .479 \$3,281,837.16
Finally, the appropriate distribution can be made for each product
RC1 Break-even Year 102,695.01 units or \$2,198,930.9
RC2 Break-even Year 50,581 units or \$1,083,006.26
RC1 Break-even Monthly 8,558 units
Rc2 Break-even Monthly = 4,215 units
By looking at these numbers, Klein is able to see that if they sell what they expect each month then they should not have problems to break e-even.
3) The third question that Klein concerns the manufacturing cost per unit if producing 8000 RC1 and 4000 RC2. By knowing the answer to this question Klein will know the impact of that fixed and variable cost have to their budget.
To answer this question, it is required to use variable costing in order to show a change in manufacturing cost per unit. Table 2.1 shows a new monthly variable costing template adjusted to production change. The table expresses manufacturing cost for RC1 is \$10.31 per unit and for RC2 \$12.18 per unit. Also, the Contribution margin ration did not change in comparison to table 1.1. With this information and the fixed cost given by table 2.2 one can determine a new break-even point for this amount of production which is \$166,221.3. The following calculations show the process used to determine...

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