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I attended our industry's showcase conference last month and learned that Chester is updating their pricing strategy for their product City. Early intel suggests
I attended our industry's showcase conference last month and learned that Chester is updating their pricing strategy for their product City. Early intel suggests that they'll drop the price $1.80. They'll likely continue to keep both material and labor costs consistent at $6.90 and $9.32 per unit respectively, and I want us to better understand what their break-even point is. How many units (000) of City must they sell to break even? You can expect their period costs to stay consistent with the Income Statement available in your Drive. Thanks in advance! Sincerely, Sanjay Sanjay Singh Board Member, Operations | Andrews Corporation 936 units 720 units 1155 units 244 units Sales Variable Costs Direct Material Direct Labor Inventory Carry Total Variable Costs (Labor, Material, Carry) Contribution Margin Period Costs City Cid Coat Cozy Cat Creak Total $15,030 $27,356 $38,477 $26,979 $34,485 $33,861 $176,189 $5,216 $6,952 $16,027 $12,766 $12,912 $14,810 $68,683 $6,673 $8,935 $11,443 $6,973 $10,202 $7,166 $51,393 $333 $168 $685 $429 $472 $0 $2,087 $12,223 $16,055 $28,155 $20,168 $23,586 $21,976 $122,163 $2,807 $11,301 $10,322 $6,811 $10,899 $11,885 $54,026 Industry Avg Percentage $163,344 100% $60,670 $43,734 39% 29.2% $1,312 1.2% $105,716 69.3% $57,629 30.7% Depreciation $1,489 $2,904 $1,430 $1,401 $1,835 $1,479 $10,538 $11,380 6% SG&A R&D Promotions Sales Administration Total Period Costs Net Margin $79 $829 $1,000 $924 $903 $979 $4,715 $959 $1,159 $1,388 $1,388 $1,388 $1,388 $7,668 $784 $1,259 $1,338 $1,338 $1,338 $1,338 $7,393 $132 $241 $339 $238 $304 $298 $1,553 $3,443 $6,391 $5,495 $5,289 $5,768 $5,482 $31,867 ($636) $4,910 $4,827 $1,523 $5,131 $6,403 $22,158 Other Expenses $5,573 EBIT $16,585 Short-Term Interest $1,571 $2,944 2.7% $6,909 4.4% $7,170 4.2% $1,338 0.9% $29,741 18.1% $27,887 12.6% $5,885 3.2% $22,002 9.4% $1,529 0.9% Long-Term Interest $6,186 Taxes & Tariffs $3,090 $6,435 3.5% $4,913 1.8% Profit Sharing $115 $182 0.1% Net Profit $5,624 $8,942 3.2%
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