HERE ARE THE QUESTIONS/PROBLEMS TO BE SOLVED:

Premise: For this activity, you have been hired 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 Word or PowerPoint for your completed presentation. It should consist of 8 - 12 slides.

1) First part of assignment: Management has provided the following revenue and cost information:

HIGH END SET

Sales price:$3,500 per unit

Labor:$875 per unit

Materials:$1,400 per unit

Direct fixed costs:$25,000 per month

Allocated fixed costs:$85,000 per month

ECONOMICAL SET

Sales price:$1,000 per unit

Labor:$250 per unit

Materials:$300 per unit

Direct fixed costs:$16,500 per month

Allocated fixed costs:$85,000 per month

To get a better understanding of the business to make budgeting and sales goals decisions, determine the following:

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, please do the following:

a) present the information

b) describe how you performed your calculations

c) explain what the results mean.

2) Second part of assignment: 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%.

NOTES:

They will incur all operational costs in Year 1, though sales are expected to be 55% of break-even.

Break-even (considering only direct fixed costs) is expected to occur in Year 2.

Variable costs will increase 2% each year, starting in Year 3.

Sales are estimated to grow by 10%, 15%, and 20% for years 3 - 5.

3) Third part of assignment: Calculate the following for the project:

The product's CONTRIBUTION MARGIN

BREAK-EVEN QUANTITY

NET PRESENT VALUE

INTERNAL RATE OF RETURN

4) Fourth part of assignment: Once you have determined the amounts, describe how you performed the calculations and explain what the results mean.

5) Fifth part of assignment: After you have completed the calculations and presented your work, management makes the investment. Explain how the project analyses do or do not support this decision. In either case, what are the factors that should have been considered in management's decision?