finance Herzing University Break Even

Quantitative Analysis:

Based on the information presented in Tables 1 and 2, calculate the following:

1. Calculate Total Variable Costs.
2. Calculate Total Fixed Costs
3. Calculate Contribution Margin per Unit
4. Calculate Break-Even, Unit Sales
5. Calculate Target Profit

Unit 3_Fashion Designs International, Inc..pdf
Table 1
Fashion Designs International, Inc.
Comparative Income Statements
Sales
Cost of Goods Sold:
Fabric
Cutting
Sewing
Brand labels
Thread etc.
Shipping and freight
Total Cost of Goods Sold
Gross Profit
Operating Expenses:
Bank charges
Salary expense
Wage expense
Employee benefits – salaried employees
Employee benefits – hourly employees
Insurance
Information Technology services
Legal fees
Licenses and permits
Meals and entertainment
Printing and reproduction
Professional Fees
Marketing and promotion
Rent – Office
Rent – Warehouse
Repairs and maintenance
Security expense
Office supplies
Telephone and internet
Vehicle expenses
Travel expenses
Utilities
Total operating expenses
Profit before taxes
Income taxes
Profit after taxes
2014
$1,987,050
year ended December 31,
2015
$2,124,885
237,250
201,500
260,000
3,900
650
29,250
732,550
1,254,500
250,390
212,660
274,400
4,116
686
30,870
773,122
1,351,763
1,260
350,000
263,250
63,000
31,590
22,450
8,220
15,000
5,400
14,304
1,452
15,504
30,996
36,996
41,004
8,592
2,100
2,136
2,472
5,760
21,000
1,956
944,442
310,058
93,017
$217,041
1,260
360,000
291,722
64,800
35,007
22,450
8,340
18,840
5,400
15,019
1,740
16,260
34,104
36,996
42,234
7,380
2,100
2,532
2,604
5,875
21,210
2,034
997,907
353,856
106,157
$247,699
Table 2
Fashion Designs International, Inc.
Assumptions for Income and Expense Projections
Expense Item
Cost of Goods Sold:
Fabric (2)
Cutting (2)
Sewing (3)
Brand labels (4)
Thread etc. (1)
Shipping and freight (5)
F/V (1a)
Operating Expenses:
Bank charges
Sal exp – owner
Sal exp – employees
Wage expense
Emp benis – sal
Emp benis – hrly
Insurance
IT services
Legal fees
Lic & Permits
Meals and entertainment
Printing and reproduction
Professional Fees
Marketing and promotion
Rent – Office
Rent – Warehouse
Repairs and maintenance
Security expense
Office supplies
Telephone and internet
Vehicle expenses
Travel expenses
Utilities
1a F = fixed cost; V = variable cost;
1b for variable (V): amount per unit; for fixed (F): annual amount
2 cost paid on per yard basis ;
3 cost paid on per piece basis
4 cost paid on per label basis ;
5 cost paid on weight and volume basis
6 units sold and units produced both projected to grow at annual rate of 6%
V
V
V
V
V
V
F
F
F
V
F
V
F
F
F
F
F
F
F
F
F
F
F
F
F
F
F
F
F
Formula
units sold (6)
units sold (6)
units sold (6)
units sold (6)
units sold (6)
units sold (6)
x VC per unit
x VC per unit
x VC per unit
x VC per unit
x VC per unit
x VC per unit
fixed monthly cost x 12
fixed annual cost x 1
fixed annual cost x 1
units produced x VC per unit
salary expense x percentage
wage expense x percentage
fixed annual cost x 1
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed monthly cost x 12
fixed quarterly cost x 4
fixed monthly cost x 12
mber 31,
2016
$2,249,830
264,260
224,440
289,600
4,344
724
32,580
815,948
1,433,882
1,320
370,500
323,275
66,690
38,793
23,124
8,520
20,280
5,400
15,925
1,860
16,920
30,996
37,380
42,234
10,188
2,184
2,844
2,808
6,051
21,846
2,156
1,051,295
382,587
114,776
$267,811
Projected
annual
growth
Effect of
overseas
move
$7.30000
$6.20000
$8.00000
$0.12000
$0.02000
$0.90000
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
-50%
-50%
-50%
-50%
-50%
300%
$1,320
$150,000
$220,500
$8.93025
$66,690
$1.07163
$23,124
$8,520
$20,280
$5,400
$15,925
$1,860
$16,920
$30,996
$37,380
$42,234
$10,188
$2,184
$2,844
$2,808
$6,051
$21,846
$2,156
1.5%
0.0%
2.0%
2.0%
same %
same %
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
0%
0%
0%
-20%
0%
0%
250%
0%
200%
75%
0%
0%
0%
0%
0%
0%
20%
0%
0%
0%
0%
400%
0%
2016 amount
(1b)
Fashion Designs International, Inc
Global Assumptions:
.
2016
units sold
36,200
units produced
36,200
avg sales price
$62.15
income tax rate
30%
benefits – salary
18.0%
benefits – wages
12.0%
Desired Cash Payout
(a) – Calculate Total Variable Costs
Total variable costs
(b) – Calculate Total Fixed Costs
Total fixed costs
(c) – Calculate Contribution Margin per Unit
Sales price per unit
Variable costs per unit (a)
Contrib margin per unit
(d) – Calculate Break-Even, Unit Sales
Fixed costs (b)
÷ CM/U
Unit sales, BEP
(e) – Calculate Target Profit
Desired cash payout to owner (from
scenario)
Subtract owner salary
Target profit after taxes
÷ 100% less income tax rate
Target profit before taxes
Fixed costs
FC + target profit
÷ CM/U
Unit sales, target profit