For this activity, you have been hired as a team of consultants on a multi-year basis for a global washer and dryer manufacturer. They currently offer two core washer and dryer sets: a high-end model and an economical model. You are tasked to complete several calculations and present your findings to the company stakeholders. You may use any presentation software (Google Slides, Prezi, PowerPoint, etc.) and your completed presentation should consist of 8 - 12 slides. A copy of the final presentation will be submitted by each member of the group in Unit 7.

1. For your first assignment, management has provided the following revenue and cost information:

High End Set

Economical Set

Sales price

$3,500

per unit

$1,000

per unit

Labor

$875

per unit

$250

per unit

Materials

$1,400

per unit

$300

per unit

Direct fixed costs

$25,000

per month

$16,500

per month

Allocated fixed costs

$85,000

per month

$85,000

per month

They want a better understanding of their business to make budgeting and sales goals decisions and have asked you to determine their:

a. Break-even quantities for each product line

b. Break-even quantities to earn $500,000 per year margin on the high-end line (at the current sales price)

c. Break-even quantities to earn $300,000 per year margin on the economical line (at the current sales price)

They expect the product lines to fully absorb the costs allocated to them.

Once you have determined these amounts, they have asked that you present the information, describe how you performed your calculations, and explain what the results mean.

2. Later, the company is considering the purchase of machinery and equipment to set up a line to produce a combination washer-dryer. They have given you the following information to analyze the project on a 5-year timeline:

Initial cash outlay is $150,000, no residual value.

Sales price is expected to be $2,250 per unit, with $595 per unit in labor expense and $795 per unit in materials.

Direct fixed costs are estimated to run $20,750 per month.

Cost of capital is 8%, and the required rate of return is 10%.