Bannister Co. is thinking about having one of its products manufactured by a subcontractor. Currently, the cost of manufacturing
1 answer:
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Answer:
BEP 2016: $ 1,700,000
BEP 2017:
under proposition a)
contribution margin:
(2,310,000 * 1.25 - 924,000) / 2,310,000 * 1.25 = 1,500,000
under porposition b)
fixed cost decrease by: 197,000 - 40,000 = 157,000
contribution margin decrease by 5% to 55%
(1,020,000 - 157,000) / (0.6 - 0.05) = 1,569,090.90
under proposition c)
We distrubute the same cost but now 50% is fixed and 50% variable:
1,944,000 x 50% = 927,000
contribution margin:
2,310,000 - 927,000 = 1,383,000
ratio: 1,383,000 / 2,310,000 = 0.5987
BEP
927,000 / 0.5987 = 1,548,354.77
Explanation:
Break even point formula:
Where:
Sales: 2,310,000
Variable cost: 924,000
Contribution: 2,310,000 - 924,000 = 1,386,000
Contribution ratio: 1,386,000 / 2,310,000 = 0.6
Fixed cost: 1,020,000
BEP 2016
1,020,000 / 0.60 = 1,700,000