Base off of the below information: write an official memo to the president of this company to disclose the findings and possible recommendations: (Analyze the impact of the break even point in #3 and #5. Do you support the decision made? why or why not? AND Perform an analysis on the current and proposed sales compensation structure. What strategies can be implemented in the sales commission structure to result in increased profits and efficiency for the company?) What needs to go in the memo is this: *Analyze the impact of the break even point in #3 and #5. Do you support the decision made? why or why not? (the work is listed below) and *Perform an analysis on the current and proposed sales compensation structure. What strategies can be implemented in the sales commission structure to result in increased profits and efficiency for the company?)

January

European Standard

Sales ($200 x 10,000)= $2,000,000

Variable Exp. ($110 x 10,000=$1,100,000 + $20 x 10,000= $200,000)=$1,300,000

Contribution Margin: ($2,000,000- $1,300,000)= $700,000

Fixed Exp.: $420,000 (given)

Net Operating Income: ($700,000-$420,000)=$280,000

European Deluxe

Sales: ($300 x 5,000) =$1,500,000

Variable Exp. ($210 x 5,000=$1,050,000 + $30 x 5,000=$150,000) = $1,200,000

Contribution Margin: ($1,500,000-$1,200,000) = $300,000

Fixed Exp.: $420,000 (given)

Net Operating Loss: ($300,000-$420,000) = -$120,000

Total

Sales: ($2,000,000 + $1,500,000) = $3,500,000 (100%)

Variable Exp. ($1,300,000 + $1,200,000) =$2,500,000 (71%)

Contribution Margin: ($3,500,000 - $2,500,000) =$1,000,000 (29%)

Fixed Exp: $420,000 (given)

Net Operating Income: ($1,000,000 - $420,000) = $580,000

February

European Standard

Sales: ($200 x 5,000) = $1,000,000

Variable Exp. ($110 x 5,000=$550,000 + $20 x 5,000=$100,000) =$650,000

Contribution Margin: ($1,000,000-$650,000) =$350,000

Fixed Exp.: $420,000 (given)

Net Operating Loss: ($350,000- $420,000) = -$70,000

European Deluxe

Sales: ($300 x 10,000) = $3,000,000

Variable Exp. ($210 x 10,000= $2,100,000 + $30 x 10,000=$300,000) =$2,400,000

Contribution Margin: ($3,000,000-$2,400,000) =$600,000

Fixed Exp.: $420,000 (given)

Net Operating Income: ($600,000-$420,000) =$180,000

Total

Sales: ($1,000,000 + $3,000,000) = $4,000,000 (100%)

Variable Exp. ($650,000 + $2,400,000) = $3,050,000 (76%)

Contribution Margin: ($350,000 + $600,000) = $950,000 (24%)

Fixed Exp.: $420,000 (given)

Net Operating Income: ($950,000-$420,000) = $530,000

2. January

Dollar Sales= Fixed Exp./Contribution Margin Ratio

$420,000/29%=$1,448,275.86

February

Dollar Sales= Fixed Exp./Contribution Margin Ratio

$420,000/24%=$1,750,000.00

3. March

European Standard

Sales: ($200 x 5,000) = $1,000,000

Variable Exp. ($110 x 5,000= $550,000 + $20 x 5,000=$100,000) = $650,000

Contribution Margin: ($1,000,000-$650,000) =$350,000

Fixed Exp.: $420,000 (given)

Net Operating Loss: ($350,000 - $420,000) = $-70,000

European Deluxe

Sales: ($300 x 15,500)= $4,650,000

Variable Exp. ($255 x 15,500=$3,952,500 + $30 x 15,500=$465,000) = $4,417,500

Contribution Margin: ($4,650,000-$4,417,500) = $232,500

Fixed Exp.: $420,000 (given)

Net Operating Loss: ($232,500-$420,000) = -$187,500

Total

Sales: ($1,000,000 + $4,650,000)=$5,650,000 (100%)

Variable Exp. ($650,000 + $4,417,500)= $5,067,500 (90%)

Contribution Margin: ($5,650,000-$5,067,500) = $582,500 (10%)

Fixed Exp.: $420,000 (given)

Net Operating Income: ($582,500-$420,000)=$162,500

4. March

Dollar Sales= Fixed Exp./Contribution Margin Ratio

$420,000/10%=$4,200,000

5. European Standard

Sales: ($200 x 5,000) =$1,000,000

Variable Exp. ($110 x 5,000) = $550,000

Contribution Margin: ($1,000,000-$550,000) = $450,000

Fixed Exp.: ($420,000 + $450,000)= $870,000

Net Operating Loss: ($450,000-$870,000) = -$420,000

European Deluxe

Sales: ($300 x 15,500) = $4,650,000

Variable Exp. ($255 x 15,500) = $3,952,500

Contribution Margin: ($4,650,000-$4,417,500) = $697,500

Fixed Exp.: ($420,000 + $450,000) = $870,000

Net Operating Loss: ($232,500-$420,000) = -$187,500

Total

Sales: ($1,000,000 + $4,650,000) = $5,650,000 (100%)

Variable Exp. ($550,000 + $3,952,500) = $4,502,500 (80%)

Contribution Margin: ($5,650,000- $4,502,500) = $1,147,500 (20%)

Fixed Exp.: ($420,000 + $450,000) = $870,000

Net Operating Income: ($1,147,500 - $870,000) = $277,500

Dollar Sales= Fixed Exp./Contribution Margin Ratio

$870,000/20%=$4,350,000