Project 5/6 Cost Volume Profit Analysis Name____________________

Include the following information from your CONNECT problem for Haas Company. All items are directly from your CONNECT problem except the CM ratio, which you must calculate.

Direct Material per unit			Break-Even units
Direct labor per unit			NOI variable costing:
Variable overhead per unit			Year 1
Variable S & A per unit			Year 2
Fixed overhead			Year 3
Fixed S & A Costs			Contribution Margin $
Sales price per unit			CM ratio (Calculate)

(4 points) Assume a marketing study says that Haas Company could increase the number of units sold if they lowered their price. If Haas lowered their sales price $1 per unit, how many units would they have to sell to make the same operating income as they did in Year 3?

Assuming the original sales price, Haas is anticipating an increase to labor rates such that variable expenses will increase by $3.

(2 points) What will the CM ratio and Break-Even point in units be with the labor increase?

(2 points) How many units will Haas need to sell to maintain the same operating income as Year 3?

(2 points) The company president feels that the company must raise the selling price of its products to accommodate the labor rate increase. If they want to maintain the same CM ratio (percent) as Year 3, what selling price must be charged to cover the increased labor costs?

(4 points) Using the original data for Year 3, compute the operating leverage, margin of safety in dollars and percent.

Refer to the original data. The company is considering construction of a new automated manufacturing plant. The new plant would slash variable expenses by 30%, but would cause fixed expenses per year to double.

(2 points) If the new plant is built, what would be the companys new CM ratio and new break-even point in units?

(2 points) How many units would need to be sold to earn the same operating income as in year 3?

(5 points) Assume Haas sells the same units as in Year 3 in the new plant, calculate the new margin of safety in dollars and percent. Calculate the new operating leverage. Have these improved or declined? Discuss in 30 to 50 words.

(2 points) If you were a member of top management, would you have been in favor of constructing the new plant? Explain in 30 to 50 words.

Name Project 5/6 - Cost Volume Profit Analysis Include the following information from your CONNECT problem for Haas Company. All items are directly from your CONNECT problem except the CM ratio, which you must calculate 1) Break-Even units 60000 Direct Material per unit Direct labor per unit Variable overhead per unit Variable S & A per unit Fixed overhead Fixed S & A Costs Sales price per unit $26 $18 $9 $1 $540000 $120000 S65 NOI - variable costin Year 1 Year 2 Year 3 $(110000) 55000 Contribution Margin $ 715000 CM ratio (Calculate 0.18 (4 points) Assume a marketing study says that Haas Company could increase the number of units sold if they lowered their price. If Haas lowered their sales price S1 per unit, how many units would they have to sell to make the same operating income as they did in Year 3? 4225000/S64 66,015 2)