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Chester has a new design for their product City next round that can reduce their material cost of producing units from $8.14 to $7.32. Chester
Chester has a new design for their product City next round that can reduce their material cost of producing units from $8.14 to $7.32. Chester passes on half of all cost savings by cutting the current price to customers. For simplicity: - Use current labor costs of $4.06 - Assume all period costs as reported on Chester's Income Statement (Annual Rpt Pg 2) will remain the same.
Determine how many units (000) of product City would need to be sold next round to break even on the product.
(Product Name:) | Cell | City | Cozy | Cute | Crimp | Cake | Na | Na | 2021 Total | Common Size |
Sales | $16,174 | $34,748 | $40,214 | $31,895 | $32,448 | $23,167 | $0 | $0 | $178,646 | 100.0% |
Variable Costs: | ||||||||||
Direct Labor | $1,852 | $7,426 | $9,843 | $5,881 | $8,616 | $4,675 | $0 | $0 | $38,293 | 21.4% |
Direct Material | $5,654 | $15,370 | $16,581 | $11,722 | $13,843 | $9,782 | $0 | $0 | $72,951 | 40.8% |
Inventory Carry | $544 | $449 | $753 | $616 | $68 | $0 | $0 | $0 | $2,430 | 1.4% |
Total Variable | $8,049 | $23,244 | $27,178 | $18,219 | $22,527 | $14,457 | $0 | $0 | $113,674 | 63.6% |
Contribution Margin | $8,124 | $11,504 | $13,036 | $13,675 | $9,922 | $8,711 | $0 | $0 | $64,972 | 36.4% |
Period Costs: | ||||||||||
Depreciation | $3,833 | $4,753 | $2,380 | $2,267 | $2,635 | $2,475 | $0 | $0 | $18,343 | 10.3% |
SG&A: R&D | $983 | $0 | $973 | $973 | $995 | $114 | $0 | $0 | $4,039 | 2.3% |
Promotions | $1,140 | $1,140 | $1,140 | $1,140 | $1,140 | $1,140 | $0 | $0 | $6,840 | 3.8% |
Sales | $1,000 | $1,000 | $1,900 | $2,200 | $900 | $900 | $0 | $0 | $7,900 | 4.4% |
Admin | $263 | $564 | $653 | $518 | $527 | $376 | $0 | $0 | $2,901 | 1.6% |
Total Period | $7,219 | $7,458 | $7,046 | $7,098 | $6,197 | $5,005 | $0 | $0 | $40,022 | 22.4% |
Net Margin | $906 | $4,046 | $5,990 | $6,577 | $3,725 | $3,706 | $0 | $0 | $24,950 | 14.0% |
Production Information
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