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Haas Company manufactures and sells one product. The following information pertains to each of the company's first three years of operations: Variable costs per unit:
Haas Company manufactures and sells one product. The following information pertains to each of the company's first three years of operations: Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $ $ $ 27 14 6 1 ta $ 510,000 $ 210,000 During its first year of operations, Haas produced 60,000 units and sold 60,000 units. During its second year of operations, it produced 75,000 units and sold 50,000 units. In its third year, Haas produced 40,000 units and sold 65,000 units. The selling price of the company's product is $60 per unit. 6) Complete the table below assuming the indicated number of units were produced and sold. Remember to include S&A variable expenses in your variable expenses. Total Units produced/sol Sales Revenue Variable Expenses Fixed Expenses Expenses Profit/NOI d 0 20,000 40,000 60,000 80,000 Note: Check figures must be supported to earn credit for grading purposes. Base Year calculations: In order for Haas Company to consider any alternatives, they must first understand their current or "base" position. Break-even, Margin of Safety and Degree of Operating Leverage are 3 criteria that can indicate the company's current situation. Use Haas's anticipated Year 4 information for these "base year" calculations. 8) Margin of Safety evaluates the company's position compared to "break-even. Use the information from 6) above and your CONNECT problem to summarize the information in the table below. Calculate the Margin of Safety in (a) dollars (b) units and (c) percent for Year 4. Remember, Haas Company produces and sells the same number of units in Year 4 that they SOLD in year 3. Break-even Base Year 4 Units Sales Revenue NOI a) MoS dollars b) MoS units c) MoS % Note: Check figures must be supported to earn credit for grading purposes. 9) Calculate the Degree of Operating Leverage for Year 4, assuming nothing else changes
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