I would like someone to double check the work that has been done on this project. I have attached the Excel spreadsheet that we have completed which shows the subsequent tabs for each step. I have also attached the three parts of the project to be completed. Please point out anything that may be incorrect along with any recommendations for change.

Tennis Pro * Numbers in Column A represent Part 1 Question identifier 1. Company Name Tennis Pro 2. 3. Mission Statement Products to Produce and Sell We strive to manufacture top-of-the-line tennis gear to make you play like a pro Tennis Balls and Tennis Rackets 4. Product Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Raw Material Rubber Shell Nylon Felt Cover Aluminum Nylon Strings Double-Sided Tape Vinyl Grip Tape Butt Cap Materials Units shells sq. foot pound foot foot foot part Quantity Per Unit 2 1 1 40 2 2 1 5. (DM and DL Portion of Product Cost) Manufacturing Process *Manufacturing Overhead Below Product Tennis Ball Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket 5. Manufacturing Overhead Portion of Product Cost Process Form Core Fabric Cover Fabric Cover Forming the Frame Forming the Frame Drilling and Sanding Tempering Stringing Stringing Finishing Finishing Finishing Step Press & Pressure Shells Cut Fabric Glue / Wrap Ball Melt Aluminum Form Frame Drill & Sand Holes Heating & Cooling Fit Racket Stringing Butt Cap Double-Sided Tape Vinyl Grip Machine Press & Pressurize Fabric Cutting Wrapping & Gluing Heating Machine Die Drilling & Sanding Heating and Coolin Stringing Machine - Manufacturing Overhead Cost Category Factory Utilites Machine Maintenance & Repairs Supervisory Salaries Material Handlers Wages Janitor Wages Indirect Materials Insurance Depreciation Property Taxes Cost / Unit Cost Type $0.05 $0.05 $0.02 - Variable Variable Fixed Fixed Fixed Variable Fixed Fixed Fixed 6. 7. Machine hours drive activity level, as noted in the predetermined overhead rate calculation Direct Labor is the largest part of the direct costs for each product 10. Hourly Workers Function Hourly Wages / Worker Core Form Machine Handler $8 Fabric Cutting & Covering Machine H $8 # of Workers 2 2 Annual Cost $100,000 $100,000 $400,000 $150,000 $30,000 $45,000 $75,000 $50,000 $50,000 Total Expense Form Framing Handlers Drilling and Sanding Handlers Tempering Handlers Stringing and Finishing Staff Function Retail Store Staff Retail Store Manager Shift Supervisor HR Manager Engineers Finance & Accounting Manager Customer Service Supervisor CEO VP Sales Associate 11. Category Advertising Building Rent Selling Expenses (Commissons) Shipping Costs 12. Tennis Ball Tennis Racket 14. Yearly Employees Salary / Employee $15,000 $35,000 $55,000 $65,000 $80,000 $70,000 $45,000 $200,000 $100,000 Commission - Only 10% of Sales Other Costs Type Sales - Fixed Admin - Fixed Sales - Variable Sales - Variable 2 2 2 4 # of Workers 8 4 1 1 2 2 2 1 1 10 Cost / Unit 10% $0.50 Total Expense $100,000 $120,000 $4,150,000 1,100,000 Bottleneck Process Time Units / Hour Units / Day 0.08 0.16 750 375 DM $0.20 $10.96 DL $0.96 $14.55 Production Volume Product 13. $15 $15 $15 $15 Product Cost Per Unit Product Tennis Balls Tennis Rackets Traditional Format Income Statement Sales ........................................................................ Cost of Good Sold...................................................... Gross Margin............................................................ Selling and Administrative Expenses Selling....................................... $5,350,000 Administrative........................... $785,000 Net Operating Income...................................... Contribution Margin Income Statement Sales.................................................................. Variable Expenses $19,842,000 Cost of Goods Sold (Variable) $5,250,000 Variable Selling........................... $0 Variable Administrative......... Contribution Margin............................................. Fixed Expenses $755,000.00 Cost of Goods Sold (Fixed)...... $100,000.00 Fixed Selling................................ $785,000.00 Fixed Administrative........................ Net Operating Income............................................. $41,500,000 $20,597,000 $20,903,000 $14,768,000 $41,500,000 $16,408,000 $14,768,000 6,000 3,000 MOH $0.13 $1.15 ke you play like a pro aterials Price Per Unit $0.05 $0.10 $0.67 $0.25 $0.02 $0.05 $0.15 Price Per Part $0.10 $0.10 $0.67 $10.00 $0.04 $0.10 $0.15 Classification DM DM DM DM DM DM DM Method Purchase Purchase Purchase Purchase Purchase Purchase Purchase Hours (DMH) Hours (DLH) Cost / DLH Direct Labor Cost / Unit 0.06 0.03 0.03 0.16 0.16 0.16 0.1 0 0.5 0 0 0 0.06 0.03 0.03 0.03 0.08 0.06 0.08 0.08 0.5 0.08 0.03 0.03 $8.00 $8.00 $8.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $0.48 $0.24 $0.24 $0.45 $1.20 $0.90 $1.20 $1.20 $7.50 $1.20 $0.45 $0.45 uring Process 8. Store Locations 9. Production Facilities Operation Locations Retail Stores Factories Columbia, Missouri Kansas City, Missouri Kansas City, Missouri Saint Louis, Missouri Springfield, Missouri Saint Louis, Missouri Possible Units 1,566,000 783,000 Total $1.29 $26.66 Units Produced and Sold 1,500,000 700,000 Selling Selling Price / Unit $2.00 $55.00 Total Machine Hours 180,000 756,000 Predetermined Overhead Rate 1.07 Tennis Pro Product Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Raw Material Rubber Shell Nylon Felt Cover Aluminum Nylon Strings Double-Sided Tape Vinyl Grip Tape Butt Cap Quantity Per Unit 2 1 1 40 2 2 1 Materials Units shells sq. foot pound foot foot foot part Y2 Price Per Unit $0.051 $0.103 $0.688 $0.257 $0.021 $0.051 $0.154 Manufacturing Process Product Tennis Ball Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Process Form Core Fabric Cover Fabric Cover Forming the Frame Forming the Frame Drilling and Sanding Tempering Stringing Stringing Finishing Finishing Finishing Step Press & Pressure Shells Cut Fabric Glue / Wrap Ball Melt Aluminum Form Frame Drill & Sand Holes Heating & Cooling Fit Racket Stringing Butt Cap Double-Sided Tape Vinyl Grip Machine Hours (DMH) Press & Pressurizer Fabric Cutting Wrapping & Gluing M Heating Machine Die Drilling & Sanding M Heating and Cooling Stringing Machine - 0.06 0.03 0.03 0.16 0.16 0.16 0.1 0 0.5 0 0 0 Manufacturing Overhead Cost Category Factory Utilites Machine Maintenance & Repairs Supervisory Salaries Material Handlers Wages Janitor Wages Indirect Materials Insurance Depreciation Property Taxes Cost / Unit Cost Type $0.05 $0.05 $0.02 - Variable Variable Fixed Fixed Fixed Variable Fixed Fixed Fixed Hourly Workers Function Hourly Wages / Worker Core Form Machine Handler $8 Fabric Cutting & Covering Machine H $8 Form Framing Handlers $15 Drilling and Sanding Handlers $15 Tempering Handlers $15 Stringing and Finishing Staff $15 Retail Store Staff $10 Function Retail Store Staff Retail Store Manager Shift Supervisor HR Manager Yearly Employees Salary / Employee $15,000 $35,000 $55,000 $65,000 # of Workers 2 2 2 2 2 4 8 # of Workers 8 4 1 1 Annual Cost $100,330 $100,330 $400,000 $150,000 $30,000 $45,148 $75,000 $50,000 $50,000 Engineers Finance & Accounting Manager Customer Service Supervisor CEO VP Sales Associate Category Advertising Building Rent Selling Expenses (Commissons) Shipping Costs $80,000 $70,000 $45,000 $200,000 $100,000 Commission - Only 10% of Sales Other Costs Type Sales - Fixed Admin - Fixed Sales - Variable Sales - Variable 2 2 2 1 1 10 Cost / Unit 10% $0.50 Total Expense $100,000 $120,000 $4,225,650 1,103,625 Bottleneck Process Time Units / Hour Units / Day 0.08 0.16 750 375 DM $0.21 $11.26 DL $0.96 $14.55 Production Volume Product Tennis Ball Tennis Racket Product Cost Per Unit Product Tennis Balls Tennis Rackets Traditional Format Income Statement Sales ........................................................................ Cost of Good Sold...................................................... Gross Margin............................................................ Selling and Administrative Expenses Selling....................................... $5,429,275 Administrative........................... $785,000 Yearly Employee Salary $665,000 Building Rent $120,000 Net Operating Income...................................... Sales.................................................................. Variable Expenses Contribution Margin............................................. Fixed Expenses Net Operating Income............................................. 6,000 3,000 MOH $0.13 $1.14 Possible Units 1,566,000 783,000 Total $1.29 $26.95 $42,256,500 $21,170,530 $21,085,970 $14,871,695 Contribution Margin Income Statement Tennis Balls Per Unit Amount Percent $2,986,500 100% $2.00 $2,951,952 98.84% $1.98 $34,548 1.16% $0.02 $14,871,695 Y2 Price Per Part $0.103 $0.103 $0.688 $10.275 $0.041 $0.103 $0.154 Classification DM DM DM DM DM DM DM Hours (DLH) Cost / DLH Direct Labor Cost / Unit 0.06 0.03 0.03 0.03 0.08 0.06 0.08 0.08 0.5 0.08 0.03 0.03 $8.00 $8.00 $8.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $0.48 $0.24 $0.24 $0.45 $1.20 $0.90 $1.20 $1.20 $7.50 $1.20 $0.45 $0.45 Operation Locations Retail Stores Columbia, Missouri Kansas City, Missouri Saint Louis, Missouri Springfield, Missouri Factories Kansas City, Missouri Saint Louis, Missouri Method Purchase Purchase Purchase Purchase Purchase Purchase Purchase Units Produced and Sold 1,493,250 714,000 Total Machine Hours 179,190 771,120 Predetermined Overhead Rate 1.05 Selling Selling Price / Unit $2.00 $55.00 argin Income Statement Tennis Racket Amount $39,270,000 $22,792,853 $16,477,147 $14,871,695 Total Percent 100.00% 58.04% 41.96% Per Unit $55.00 $31.92 $23.08 Amount $42,256,503 $25,744,805 $16,511,695 $1,640,000 $14,871,695 Percent 100.00% 60.93% 39.07% Tennis Pro Product Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Raw Material Rubber Shell Nylon Felt Cover Aluminum Nylon Strings Double-Sided Tape Vinyl Grip Tape Butt Cap Quantity Per Unit 2 1 1 40 2 2 1 Materials Units shells sq. foot pound foot foot foot part Y2 Price Per Unit $0.051 $0.103 $0.688 $0.257 $0.021 $0.051 $0.154 Manufacturing Process Product Tennis Ball Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Process Form Core Fabric Cover Fabric Cover Forming the Frame Forming the Frame Drilling and Sanding Tempering Stringing Stringing Finishing Finishing Finishing Step Press & Pressure Shells Cut Fabric Glue / Wrap Ball Melt Aluminum Form Frame Drill & Sand Holes Heating & Cooling Fit Racket Stringing Butt Cap Double-Sided Tape Vinyl Grip Machine Hours (DMH) Press & Pressurizer Fabric Cutting Wrapping & Gluing M Heating Machine Die Drilling & Sanding M Heating and Cooling Stringing Machine - 0.06 0.03 0.03 0.16 0.16 0.16 0.1 0 0.5 0 0 0 Manufacturing Overhead Cost Category Factory Utilites Machine Maintenance & Repairs Supervisory Salaries Material Handlers Wages Janitor Wages Indirect Materials Insurance Depreciation Property Taxes Cost / Unit Cost Type $0.05 $0.05 $0.02 - Variable Variable Fixed Fixed Fixed Variable Fixed Fixed Fixed Hourly Workers Function Hourly Wages / Worker Core Form Machine Handler $8 Fabric Cutting & Covering Machine H $8 Form Framing Handlers $15 Drilling and Sanding Handlers $15 Tempering Handlers $15 Stringing and Finishing Staff $15 Retail Store Staff $10 Function Retail Store Staff Retail Store Manager Shift Supervisor HR Manager Yearly Employees Salary / Employee $15,000 $35,000 $55,000 $65,000 # of Workers 2 2 2 2 2 4 8 # of Workers 8 4 1 1 Annual Cost $100,330 $100,330 $400,000 $150,000 $30,000 $45,148 $75,000 $50,000 $50,000 Engineers Finance & Accounting Manager Customer Service Supervisor CEO VP Sales Associate Category Advertising Building Rent Selling Expenses (Commissons) Shipping Costs $80,000 $70,000 $45,000 $200,000 $100,000 Commission - Only 10% of Sales Other Costs Type Sales - Fixed Admin - Fixed Sales - Variable Sales - Variable 2 2 2 1 1 10 Cost / Unit 10% $0.50 Total Expense $110,000 $120,000 $4,225,650 1,103,625 Bottleneck Process Time Units / Hour Units / Day 0.08 0.16 750 375 DM $0.21 $11.26 DL $0.96 $14.55 $121,000.0 Production Volume Product Tennis Ball Tennis Racket Product Cost Per Unit Product Tennis Balls Tennis Rackets Traditional Format Income Statement Sales ........................................................................ Cost of Good Sold...................................................... Gross Margin............................................................ Selling and Administrative Expenses Selling....................................... $5,439,275 Administrative........................... $785,000 Yearly Employee Salary $665,000 Building Rent $120,000 Net Operating Income...................................... Sales.................................................................. Variable Expenses Contribution Margin............................................. Fixed Expenses Net Operating Income............................................. 6,000 3,000 MOH $0.13 $1.14 Possible Units 1,566,000 783,000 Total $1.29 $26.95 $42,256,500 $21,170,530 $21,085,970 $14,861,695 Contribution Margin Income Statement Tennis Balls Per Unit Amount Percent $2,986,500 100% $2.00 $2,951,952 98.84% $1.98 $34,548 1.16% $0.02 $14,861,695 Y2 Price Per Part $0.103 $0.103 $0.688 $10.275 $0.041 $0.103 $0.154 Classification DM DM DM DM DM DM DM Hours (DLH) Cost / DLH Direct Labor Cost / Unit 0.06 0.03 0.03 0.03 0.08 0.06 0.08 0.08 0.5 0.08 0.03 0.03 $8.00 $8.00 $8.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $0.48 $0.24 $0.24 $0.45 $1.20 $0.90 $1.20 $1.20 $7.50 $1.20 $0.45 $0.45 Operation Locations Retail Stores Columbia, Missouri Kansas City, Missouri Saint Louis, Missouri Springfield, Missouri Factories Kansas City, Missouri Saint Louis, Missouri Method Purchase Purchase Purchase Purchase Purchase Purchase Purchase Units Produced and Sold 1,493,250 714,000 Total Machine Hours 179,190 771,120 Predetermined Overhead Rate 1.05 Selling Selling Price / Unit $2.00 $55.00 argin Income Statement Tennis Racket Amount $39,270,000 $22,792,853 $16,477,147 $14,861,695 Total Percent 100.00% 58.04% 41.96% Per Unit $55.00 $31.92 $23.08 Amount $42,256,503 $25,744,805 $16,511,695 $1,650,000 $14,861,695 Percent 100.00% 60.93% 39.07% Tennis Pro Product Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Raw Material Rubber Shell Nylon Felt Cover Aluminum Nylon Strings Double-Sided Tape Vinyl Grip Tape Butt Cap Quantity Per Unit 2 1 1 40 2 2 1 Materials Units shells sq. foot pound foot foot foot part Y2 Price Per Unit $0.051 $0.101 $0.678 $0.253 $0.020 $0.051 $0.152 Manufacturing Process Product Tennis Ball Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Process Form Core Fabric Cover Fabric Cover Forming the Frame Forming the Frame Drilling and Sanding Tempering Stringing Stringing Finishing Finishing Finishing Step Press & Pressure Shells Cut Fabric Glue / Wrap Ball Melt Aluminum Form Frame Drill & Sand Holes Heating & Cooling Fit Racket Stringing Butt Cap Double-Sided Tape Vinyl Grip Machine Hours (DMH) Press & Pressurizer Fabric Cutting Wrapping & Gluing M Heating Machine Die Drilling & Sanding M Heating and Cooling Stringing Machine - 0.06 0.03 0.03 0.16 0.16 0.16 0.1 0 0.5 0 0 0 Manufacturing Overhead Cost Category Factory Utilites Machine Maintenance & Repairs Supervisory Salaries Material Handlers Wages Janitor Wages Indirect Materials Insurance Depreciation Property Taxes Cost / Unit Cost Type $0.05 $0.05 $0.02 - Variable Variable Fixed Fixed Fixed Variable Fixed Fixed Fixed Hourly Workers Function Hourly Wages / Worker Core Form Machine Handler $8 Fabric Cutting & Covering Machine H $8 Form Framing Handlers $15 Drilling and Sanding Handlers $15 Tempering Handlers $15 Stringing and Finishing Staff $15 Retail Store Staff $10 Function Retail Store Staff Retail Store Manager Shift Supervisor HR Manager Yearly Employees Salary / Employee $15,000 $35,000 $55,000 $65,000 # of Workers 2 2 2 2 2 4 8 # of Workers 8 4 1 1 Annual Cost $100,330 $100,330 $400,000 $150,000 $30,000 $45,148 $75,000 $50,000 $50,000 Engineers Finance & Accounting Manager Customer Service Supervisor CEO VP Sales Associate Category Advertising Building Rent Selling Expenses (Commissons) Shipping Costs $80,000 $70,000 $45,000 $200,000 $100,000 Commission - Only 10% of Sales Other Costs Type Sales - Fixed Admin - Fixed Sales - Variable Sales - Variable 2 2 2 1 1 10 Cost / Unit 10% $0.50 Total Expense $100,000 $120,000 $4,225,650 1,103,625 Bottleneck Process Time Units / Hour Units / Day 0.08 0.16 750 375 DM $0.20 $11.09 DL $0.96 $14.55 Production Volume Product Tennis Ball Tennis Racket Product Cost Per Unit Product Tennis Balls Tennis Rackets Traditional Format Income Statement Sales ........................................................................ Cost of Good Sold...................................................... Gross Margin............................................................ Selling and Administrative Expenses Selling....................................... $5,429,275 Administrative........................... $785,000 Yearly Employee Salary $665,000 Building Rent $120,000 Net Operating Income...................................... Sales.................................................................. Variable Expenses Contribution Margin............................................. Fixed Expenses Net Operating Income............................................. 6,000 3,000 MOH $0.13 $1.14 Possible Units 1,566,000 783,000 Total $1.29 $26.78 $42,256,500 $21,045,317 $21,211,183 $14,996,908 Contribution Margin Income Statement Tennis Balls Per Unit Amount Percent $2,986,500 100% $2.00 $2,947,349 98.69% $1.97 $39,151 1.31% $0.03 $14,996,908 Y2 Price Per Part $0.101 $0.101 $0.678 $10.121 $0.040 $0.101 $0.152 Classification DM DM DM DM DM DM DM Hours (DLH) Cost / DLH Direct Labor Cost / Unit 0.06 0.03 0.03 0.03 0.08 0.06 0.08 0.08 0.5 0.08 0.03 0.03 $8.00 $8.00 $8.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $0.48 $0.24 $0.24 $0.45 $1.20 $0.90 $1.20 $1.20 $7.50 $1.20 $0.45 $0.45 Operation Locations Retail Stores Columbia, Missouri Kansas City, Missouri Saint Louis, Missouri Springfield, Missouri Factories Kansas City, Missouri Saint Louis, Missouri Method Purchase Purchase Purchase Purchase Purchase Purchase Purchase Units Produced and Sold 1,493,250 714,000 Total Machine Hours 179,190 771,120 Predetermined Overhead Rate 1.05 Selling Selling Price / Unit $2.00 $55.00 argin Income Statement Tennis Racket Amount $39,270,000 $22,672,244 $16,597,756 $14,996,908 Total Percent 100.00% 57.73% 42.27% Per Unit $55.00 $31.75 $23.25 Amount $42,256,503 $25,619,592 $16,636,908 $1,640,000 $14,996,908 Percent 100.00% 60.63% 39.37% Tennis Pro Product Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Raw Material Rubber Shell Nylon Felt Cover Aluminum Nylon Strings Double-Sided Tape Vinyl Grip Tape Butt Cap Quantity Per Unit 2.06 1.03 1.03 41.2 2.06 2.06 1.03 Materials Units shells sq. foot pound foot foot foot part Y2 Price Per Unit $0.050 $0.100 $0.670 $0.250 $0.020 $0.050 $0.150 Manufacturing Process Product Tennis Ball Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Process Form Core Fabric Cover Fabric Cover Forming the Frame Forming the Frame Drilling and Sanding Tempering Stringing Stringing Finishing Finishing Finishing Step Press & Pressure Shells Cut Fabric Glue / Wrap Ball Melt Aluminum Form Frame Drill & Sand Holes Heating & Cooling Fit Racket Stringing Butt Cap Double-Sided Tape Vinyl Grip Machine Hours (DMH) Press & Pressurizer Fabric Cutting Wrapping & Gluing M Heating Machine Die Drilling & Sanding M Heating and Cooling Stringing Machine - 0.06 0.03 0.03 0.16 0.16 0.16 0.1 0 0.5 0 0 0 Manufacturing Overhead Cost Category Factory Utilites Machine Maintenance & Repairs Supervisory Salaries Material Handlers Wages Janitor Wages Indirect Materials Insurance Depreciation Property Taxes Cost / Unit Cost Type $0.05 $0.05 $0.02 - Variable Variable Fixed Fixed Fixed Variable Fixed Fixed Fixed Hourly Workers Function Hourly Wages / Worker Core Form Machine Handler $8 Fabric Cutting & Covering Machine H $8 Form Framing Handlers $15 Drilling and Sanding Handlers $15 Tempering Handlers $15 Stringing and Finishing Staff $15 Retail Store Staff $10 Function Retail Store Staff Retail Store Manager Shift Supervisor HR Manager Yearly Employees Salary / Employee $15,000 $35,000 $55,000 $65,000 # of Workers 2 2 2 2 2 4 8 # of Workers 8 4 1 1 Annual Cost $100,330 $100,330 $400,000 $150,000 $30,000 $45,148 $75,000 $50,000 $50,000 Engineers Finance & Accounting Manager Customer Service Supervisor CEO VP Sales Associate Category Advertising Building Rent Selling Expenses (Commissons) Shipping Costs $80,000 $70,000 $45,000 $200,000 $100,000 Commission - Only 10% of Sales Other Costs Type Sales - Fixed Admin - Fixed Sales - Variable Sales - Variable 2 2 2 1 1 10 Cost / Unit 10% $0.50 Total Expense $100,000 $120,000 $4,225,650 1,103,625 Bottleneck Process Time Units / Hour Units / Day 0.08 0.16 750 375 DM $0.21 $11.29 DL $0.96 $14.55 Production Volume Product Tennis Ball Tennis Racket Product Cost Per Unit Product Tennis Balls Tennis Rackets Traditional Format Income Statement Sales ........................................................................ Cost of Good Sold...................................................... Gross Margin............................................................ Selling and Administrative Expenses Selling....................................... $5,429,275 Administrative........................... $785,000 Yearly Employee Salary $665,000 Building Rent $120,000 Net Operating Income...................................... Sales.................................................................. Variable Expenses Contribution Margin............................................. Fixed Expenses Net Operating Income............................................. 6,000 3,000 MOH $0.13 $1.14 Possible Units 1,566,000 783,000 Total $1.29 $26.98 $42,256,500 $21,190,840 $21,065,660 $14,851,385 Contribution Margin Income Statement Tennis Balls Per Unit Amount Percent $2,986,500 100% $2.00 $2,952,698 98.87% $1.98 $33,802 1.13% $0.02 $14,851,385 Y2 Price Per Part $0.10 $0.10 $0.69 $10.30 $0.04 $0.10 $0.15 Classification DM DM DM DM DM DM DM Hours (DLH) Cost / DLH Direct Labor Cost / Unit 0.06 0.03 0.03 0.03 0.08 0.06 0.08 0.08 0.5 0.08 0.03 0.03 $8.00 $8.00 $8.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $0.48 $0.24 $0.24 $0.45 $1.20 $0.90 $1.20 $1.20 $7.50 $1.20 $0.45 $0.45 Operation Locations Retail Stores Columbia, Missouri Kansas City, Missouri Saint Louis, Missouri Springfield, Missouri Factories Kansas City, Missouri Saint Louis, Missouri Method Purchase Purchase Purchase Purchase Purchase Purchase Purchase Units Produced and Sold 1,493,250 714,000 Total Machine Hours 179,190 771,120 Predetermined Overhead Rate 1.05 Selling Selling Price / Unit $2.00 $55.00 argin Income Statement Tennis Racket Amount $39,270,000 $22,812,417 $16,457,583 $14,851,385 Total Percent 100.00% 58.09% 41.91% Per Unit $55.00 $31.95 $23.05 Amount $42,256,503 $25,765,115 $16,491,385 $1,640,000 $14,851,385 Percent 100.00% 60.97% 39.03% Tennis Pro Scenario: Decide to focus primarily on producing Tennis Rackets because the Contrib greater than that of tennis balls. Therefore, tennis racket production and sales incre production and sales decrease by 50% Product Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Raw Material Rubber Shell Nylon Felt Cover Aluminum Nylon Strings Double-Sided Tape Vinyl Grip Tape Butt Cap Quantity Per Unit 2 1 1 40 2 2 1 Materials Units shells sq. foot pound foot foot foot part Y2 Price Per Unit $0.051 $0.103 $0.688 $0.257 $0.021 $0.051 $0.154 Manufacturing Process Product Tennis Ball Tennis Ball Tennis Ball Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Tennis Racket Process Form Core Fabric Cover Fabric Cover Forming the Frame Forming the Frame Drilling and Sanding Tempering Stringing Stringing Finishing Finishing Finishing Step Press & Pressure Shells Cut Fabric Glue / Wrap Ball Melt Aluminum Form Frame Drill & Sand Holes Heating & Cooling Fit Racket Stringing Butt Cap Double-Sided Tape Vinyl Grip Machine Hours (DMH) Press & Pressurizer Fabric Cutting Wrapping & Gluing M Heating Machine Die Drilling & Sanding M Heating and Cooling Stringing Machine - 0.06 0.03 0.03 0.16 0.16 0.16 0.1 0 0.5 0 0 0 Manufacturing Overhead Cost Category Factory Utilites Machine Maintenance & Repairs Supervisory Salaries Material Handlers Wages Janitor Wages Indirect Materials Insurance Depreciation Property Taxes Cost / Unit Cost Type $0.05 $0.05 $0.02 - Variable Variable Fixed Fixed Fixed Variable Fixed Fixed Fixed Hourly Workers Function Hourly Wages / Worker Core Form Machine Handler $8 Fabric Cutting & Covering Machine H $8 Form Framing Handlers $15 Drilling and Sanding Handlers $15 Tempering Handlers $15 Stringing and Finishing Staff $15 Retail Store Staff $10 Yearly Employees # of Workers 2 2 2 2 2 4 8 Annual Cost $82,619 $82,619 $400,000 $150,000 $30,000 $37,179 $75,000 $50,000 $50,000 Function Retail Store Staff Retail Store Manager Shift Supervisor HR Manager Engineers Finance & Accounting Manager Customer Service Supervisor CEO VP Sales Associate Category Advertising Building Rent Selling Expenses (Commissons) Shipping Costs Salary / Employee $15,000 $35,000 $55,000 $65,000 $80,000 $70,000 $45,000 $200,000 $100,000 Commission - Only 10% of Sales Other Costs Type Sales - Fixed Admin - Fixed Sales - Variable Sales - Variable # of Workers 8 4 1 1 2 2 2 1 1 10 Cost / Unit 10% $0.50 Total Expense $100,000 $120,000 $6,039,825 908,813 Bottleneck Process Time Units / Hour Units / Day 0.08 0.16 750 375 DM $0.21 $11.26 DL $0.96 $14.55 Production Volume Product Tennis Ball Tennis Racket Product Cost Per Unit Product Tennis Balls Tennis Rackets Traditional Format Income Statement Sales ........................................................................ Cost of Good Sold...................................................... Gross Margin............................................................ Selling and Administrative Expenses Selling....................................... $7,048,638 Administrative........................... $785,000 Yearly Employee Salary $665,000 Building Rent $120,000 Net Operating Income...................................... Sales.................................................................. Variable Expenses Contribution Margin............................................. Fixed Expenses Net Operating Income............................................. 6,000 3,000 MOH $0.09 $0.83 Possible Units 1,566,000 783,000 Total $1.26 $26.64 $60,398,250 $29,471,618 $30,926,632 $23,092,994 Contribution Margin Income Statement Tennis Balls Per Unit Amount Percent $1,493,250 100% $2.00 $1,475,976 98.84% $1.98 $17,274 1.16% $0.02 $23,092,994 ecause the Contribution Margin / Unit is on and sales increase by 50% and tennis ball Y2 Price Per Part $0.103 $0.103 $0.688 $10.275 $0.041 $0.103 $0.154 Classification DM DM DM DM DM DM DM Hours (DLH) Cost / DLH Direct Labor Cost / Unit 0.06 0.03 0.03 0.03 0.08 0.06 0.08 0.08 0.5 0.08 0.03 0.03 $8.00 $8.00 $8.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $0.48 $0.24 $0.24 $0.45 $1.20 $0.90 $1.20 $1.20 $7.50 $1.20 $0.45 $0.45 Operation Locations Retail Stores Columbia, Missouri Kansas City, Missouri Saint Louis, Missouri Springfield, Missouri Factories Kansas City, Missouri Saint Louis, Missouri Method Purchase Purchase Purchase Purchase Purchase Purchase Purchase Units Produced and Sold 746,625 1,071,000 Total Machine Hours 89,595 1,156,680 Predetermined Overhead Rate 0.77 Selling Selling Price / Unit $2.00 $55.00 argin Income Statement Tennis Racket Amount $58,905,000 $34,189,280 $24,715,720 $23,092,994 Total Percent 100.00% 58.04% 41.96% Per Unit $55.00 $31.92 $23.08 Amount $60,398,253 $35,665,256 $24,732,994 $1,640,000 $23,092,994 Percent 100.00% 59.05% 40.95% Option Year 2 - I'm Cheap Supplier Year 2 Net Income (Original with Sales and DM Adjustments) Year 2 - Increase Advertising Year 2 - I'm Cheapest Supplier Year 1 Net Income Year 2 - Self-Scenario Total Sales $42,256,500 $42,256,503 $42,256,503 $42,256,500 $41,500,000 $60,398,250 Net Income $14,996,908 $14,871,695 $14,861,695 $14,851,385 $14,768,000 $23,092,994 Total Units 2,207,250 2,207,250 2,207,250 2,207,250 2,200,000 1,817,625 CM $16,636,908 $16,511,695 $16,511,695 $16,491,385 $16,408,000 $24,732,994 Break-Even Analysis Best Choice for Breaking Even is to use the I'm Cheap Supplier, where it is necessary to sell 217, 582 units to break even. Best Choice to attain a target profit at least equal to Year 1 is also to use I'm Cheap supplier, because it takes the smallest number of units sold (2,176 Scenario: Tennis Pro decides to focus primarily on producing Tennis Rackets because the Contribution Margin / Unit is greater than that of t production and sales increase by 50% and tennis ball production and sales decrease by 50% This option is the best choice for Tennis Pro to achieve break even and target profit from Year 1, because the contribution margin per unit is much high In order to attain break even given this scenario, Tennis Pro would have to sell 120,523 units, equating to $4,004,898 in sales. In order to attain a profit equal to that of Year 1, Tennis Pro would need to sell 1,207,941 units, equating to $40,138,938 in sales. Unit CM $7.54 $7.48 $7.48 $7.47 $7.46 $13.61 CM Ratio 0.394 0.391 0.391 0.390 0.395 0.409 Fixed Expenses $1,640,000 $1,640,000 $1,650,000 $1,640,000 $1,640,000 $1,640,000 Break Even Point (units) 217,582 219,232 220,569 219,502 219,893 120,523 mallest number of units sold (2,176,880) to meet target profit rgin / Unit is greater than that of tennis balls. Therefore, tennis racket bution margin per unit is much higher than the scenarios previously mentioned. Break Even Point Units to Attain Y1 Sales Target Profit $4,165,477 $4,197,065 $4,222,657 $4,202,234 $4,147,977 $4,004,898 2,176,880 2,193,388 2,194,725 2,196,090 2,200,000 1,205,822 Dollars to Attain Y1 Target Profit $41,675,092 $41,991,128 $42,016,720 $42,042,840 $41,500,000 $40,068,520 CVP Analysis Your current financials from part 1 are for Year 1 of your business. Create Year 2 financials by assuming the following: 1. 4.5% decrease in total sales volume for product 1 2. 2% increase in total sales volume for product 2 3. Direct material costs per unit increased. The increase in direct materials caused a 2% increase in materials per unit for all products Be sure to format your contribution income statement for both products like Exhibit 5-5 on page 206. In addition, include per unit amounts for sales, variable expenses, and contribution margin. Using year 2 financials assume the following CVP analysis scenarios. Since sales volume for product one decreased you would like to try to increase sales again by one of the following methods: a. Increase advertising by 10% b. Buy lower quality materials. Two different suppliers could provide you with lower quality materials for your product. i. Using supplier \"I'm cheap\" would decrease direct materials by 1.5%. ii. Using a different supplier \"I'm Cheapest\" would decrease direct material costs by 2% but since it is so cheap, you have to use 3% more material per unit. Which choice would be the best in order to break-even? Which would be the best to have at least the same amount of profit as you earned in year 1? You are not 100% committed to the choice you selected above - create your own scenario and determine the break-even and profit point. Considering all options select the best choice. MBA Project - Part 3 Dropping or Retaining a Segment You are considering the possibility of simplifying your business model and focusing on less products, thereby discontinuing product two. Initial research has shown that 65% of product 2 fixed expenses are sunk and will continue even if the product line is discontinued. In addition, you think that demand for product one may initially decline. The decline is estimated to be a 15% decrease in sales of product one. Using Year 2 financial information: should product two be discontinued? What will be the overall effect on net operating income of the company as a whole? Upon additional research you realized someone had made an error. This error resulted in the high estimate of sunk costs (65%). If sunk costs were only 25% what would be the overall effect on net operating income of the company as a whole? Should product two be discontinued