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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

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 economic model.

. 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

$1400

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 determine some values
  • They expect the product lines to fully absorb the costs allocated to them. They have also asked that you show each step in your calculations so that they can understand your analysis. (Note: you will be graded on your intermediary values.)

Question: Determine the following:

a. Contribution Margins for each product line

b. Break-even quantities for each product line

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

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

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

Note:

  • Please describe the circumstances of the case study and make the required recommendations.
  • Explain your approaches to the problems.
  • perform relevant calculations and analyses and justify your recommendations.
  • Evaluate the results and explain what each calculated value means. Ensure your work and conclusions are thoroughly supported.

Superior presentations will:

  • Describe the circumstances.
  • Perform all calculations correctly.
  • Articulate how the calculations were performed.
  • Evaluate the computations and explain their meanings.
  • Make recommendations, supported by well-thought-out rationale and considering various factors that could impact the recommendations.

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