KM Case Study #TLo o-5, Lo o- Susan Lo picked up the phone and called her boss, Phill Takata, the vice president of marketing at Jewel Clasps Corporation: "Phil, l'm not sure how to go about answering the questions that came up at the meeting with the president yesterday." "What's the problem?" The presldent wanted to know the break-even point for each of the company's products, but I am having trouble figuring them out." "I'm sure you can handle It, Susan. And, by the way, I need your analysis on my desk tomorrow morning at 8:00 sharp In time for the follow-up meeting at 9:00. Jewel Clasps Corporation makes three different types of Jewelry clasps In Its manufacturing facility In North Carolina. Data concerning these products appear below Gold Silver Copper Annual sales volume Unit selling price Variable expense per unit 1e4,8e0 218,8e0 299,8ee $8.9e $e.60 $1.70 $1.00 $1.60 $e.80 Total fixed expenses are $257,000 per year All three products are sold In highly competitive markets, so the company Is unable to ralse prices without losing an unacceptable numbers of customers The company has an extremely effective lean production system, so there are no beginning or ending work In process or finished goods Inventories. TIP: To answer the questions below, It will be most helpful If you prepare segmented Income statements as Illustrated In vour textbook Requirec 1. What is the company's over-all break-even point In dollar sales? 2. Of the total fixed expenses of $257,000, $17,570 could be avoided if the Gold product is dropped. $137,600 the Sllver product Is dropped, and $57,900 if the Copper product Is dropped. The remalning fixed expenses of $43,930 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avolded only by going out of business entirely a. What is the break-even polnt In unlt sales for each product? b. If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company? KM MC: Should a company allocate common fixed expenses Which of the following statements is true? There may be more than one answer: Possible answers: 1. A segment's contribution margin minus Its traceable fixed expenses equals the segment margin. 2 Allocating a portion of common fixed costs to a segments real costs may make an otherwise profitable segment appear to be unprofitable. dollar sales for a segment to break break even. segment disappears. . A company's common fixed costs should be evenly allocated to business segments when computing the 4. A segment's traceable fixed costs should Include only those costs that wil disappear over time if the Multiple Choice The true statements are: #1, #2, and #4. The true statements are: #1, #2, #3, and #4. The true statements are: #1 and #2 The true statements are: #1, #2 and #3. KM MC Types of Fixed Costs Every period, Jewel Clasps Incurs a number of different fixed costs, some of which are listed here: 1. The salary of the Silver product line manager 2 Salarles of the CEO and CFO 3. Rent on the corporate headquarters 4. Fees pald to advertise an anti-tarnish kit that can be purchased with Copper clasps 5. Straight-lne depreclation on the machine used to plate the Gold clasps with a special alloy Which of the costs above are traceable to one of Jewel's product lines? Select the best answer: Multiple Choice #1, #4, and #5 are traceable fixed costs with respect to a product line. 0 # 2 & #3 are traceable fixed costs with respect to a product line. # 1, #2 & #4, and #5 are traceable fixed costs with respect to a product line. #4 and #5 are traceable fixed costs with respect to a product line
