Table 3. Customer orders Orders 20 orders Total Units Ordered 100.000 units RCI Customer RC2 Customers 2 3 4 5-14 (Total) 15 16 17 18 Total RC2 50 40 36 30 200 12 12 12 8 400 orders 15.000 5.000 7.200 2.400 40.000 4.800 2.400 1.200 2.000 80.000 units Finally, she began to reconstruct the cost sheets for the two products, first as originally budgeted and then recognizing actual volumes and order handling costs. (See Exhibit 5). When she took a break, she had three things left to do: 1. Complete her cost sheets for the two factory" approach. 2. Compute RC2 breakeven (units/order) given that processing an order costs $400 no matter how many units were ordered 3. Figure out how 2009 could be more profitable than 2008. Exhibit BREEDEN SECURITY, INC. (B) 2008 Monthly Budget Total RCI 10,000 units $ 20.00 S200,000 RC2 5,000 units S 23.00 $115.000 $315.000 Sales Revenue Produce and sell per month Projected selling price Sales revenue Manufacturing Costs Parts Direct labor Overhead (a) Total manufacturing cost Manufacturing cost per unit Selling and administrative Total expense Profit $55.000 35.000 70.000 $160,000 16.00 $32,000 21.000 42.000 395,000 19.00 $87,000 56,000 112.000 $255,000 40.000 $295.000 $20.000 (a) Manufacturing overhead: Supplies $21,000 Occupancy (utilities, rent, maintenance) 15,000 Equipment maintenance 17.000 Equipment depreciation 8,000 Quality control and production engineering 15,000 Manufacturing administration 36,000 Total manufacturing overhead Su12.000 In this budget, overhead was allocated to the two products on the basis of direct labor estimated for the two products: $2.00 of overhead for each $1.00 of direct labor -10- Exhibit 2 BREEDEN SECURITY, INC. (B) Distribution of Direct Labor and Overhead to Activities Packing & Shipping General Operations Quality Control Assembly Fabrication Total Expense $ 22.500 $ 6,000 Direct Labor $ 56,000 $ 27.500 S 2.000 1,000 5.000 6,000 3.000 2,000 4,000 1.000 5.000 3.000 2.000 $ 1.000 3.000 2.000 15,000 Overhead: Occupancy Equip. Maintenance Equip. Depreciation Quality Control Mfg. Admin Total 15.000 17,000 8.000 15.000 36.000 S 91.000 36.000 $ 39,000 S 10,000 $ 21,000 $ 7,000 $ 14,000 (21000) 5.000 5.000 Quality Control 11.000 Total $91.000 $ 2 $ 19.000 $12.000 S21.000 $ 39.000 Supplies 21.000 Total Overhead $112.000 Exhibit 3 BREEDEN SECURITY, INC. (B) Estimated Direct Labor per Month by Activity and by Product RCI 10.000 Units RC2 5,000 Units Total Fabrication Assembly Packing and Shipping Total $ 27.500 22.500 6.000 $ 9.500 6,500 5.000 S 18.000 16,000 1.000 $ 35.000 $ 21.000 S56.000 -12- Exhibit 4 BREEDEN SECURITY, INC. (B) Revised Profit Estimates for 2008 Total RCI $20.00 5.50 Selling price Parts Direct labor Supplies Variable costs RC2 $23.00 6.40 4.20 1.46 $12.06 3.50 1.37 S10.37 Sales in units Total contribution 100,000 $963.000 80.000 $875,200 51.838.200 Normal fixed manufacturing cost Normal selling administration cost Total cost $91.000 x 12 $40,000 x 12 1,092,000 480,000 $1.572.000 5266,200 Profit before extra expenses Less extra expenses 70.000 $196.200 Projected profit -13. Exhibits BREEDEN SECURITY, INC. (B) PerUnit Product Costs ANICNI Budgeted Volume Two Factory" Cost Actual Volume RC2 RCI RCI RC2 $6,400 1.460 1.900 1 313 1.300 Driven by units Parts Supplies Fabric labor Fabric overhead Assembly labor Assembly overhead Subtotal (unchanged) Pack & ship labor Pack & ship overhead General operations Total manufacturing cost $ 3.500 1.370 1.800 1.244 1.600 0.853 $12 367 0.100 0.350 2.418 SI5.255 $ 5.500 1370 1.800 1.244 1.600 0853 S12 367 0.050 0.214 2.278 $14.909 $ 6.400 1.460 1.900 1.313 1 300 0.691 $13.066 0.813 3.471 2.649 $19.999 $13.066 1.000 3.500 2.925 $20.491 Driven by orders Total: $168,000 -0. ? 2 Selling & Admin S480,0X180,000 units $456,000/180,000 units 2.667 2.667 2.533 2.533 Total cost Unit price Profit $17.922 20.000 S 2.078 $23.158 23.000 S.(0.158) $20.000 $23.000 Finally, she began to reconstruct the cost sheets for the two products, first as originally budgeted and then recognizing actual volumes and order-handling costs. (See Exhibit 5). When she took a break, she had three things left to do: 1. Complete her cost sheets for the two factory" approach. 2. Compute RC2 breakeven (units/order) given that processing an order costs $400 no matter how many units were ordered. 3. Figure out how 2009 could be more profitable than 2008
