Task 2
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ScribdTranslationsBreak-even point Example 1
Break-even point: Variable Costs, Hi-Tek Press publishes the Yearbook video.
Last year, the book was sold for $10, with variable operating costs per book of
$8 and fixed operating costs of $40,000
How many books need to be sold this year in order to reach the break-even point?
equilibrium for the established operating costs, given the various circumstances
next?
All the figures remain the same as last year.
2. Fixed operating costs increase to $44,000; all other figures remain the same.
equal.
3. The selling price increases to $10.50, all other costs remain the same.
4. The variable operating cost per book increases to $8.50, all other costs
they remain.
5. What conclusion do you draw from your responses about the break-even point?
Breakeven Point Example 2
The company 'Motocicletas de Guadalajara, S.A DE C.V.' asks an expert to
calculate the break-even point of your product mix, for which you
provide the following data:
MOTORCYCLE MOTORCYCLE MOTORCYCLE MOTITA
Penetration in 30% 10% 40% 20%
the market
projected
Selling price 840,000 1,500,000 2,000,000 500,000
Costs 400,000 1,000,000 1,400,000 250,000
variables
The fixed costs of the company are $280,000,000
The company's assets amount to $1,250,000,000
Note: Assume a tax rate of 35% and a profit margin of 10%
a) Calculate the units to sell in order to achieve a 30% profit margin over
assets after taxes.
b) Calculate how many units and how much $ he/she should sell per line.
Leverage example 1
Degree of operating leverage: Graph, Zandy, Inc. It has fixed operating costs.
of $72,000, variable operating costs of $6.75 per unit and a selling price of
$9.75 per unit.
Calculate the operating breakeven point in units.
2. Determine the GAO for the following sales levels in units: 25,000;
30,000; 40,000. Apply the formula provided in the chapter.
3. Record the GAO figures you calculated in point 2 on a graph (on the y-axis)
and the sales levels on the x-axis.
4. Calculate the degree of operating leverage at 24,000 units, add this
figure to its graph.
Leverage example 2
Degree of financial leverage. Currently, Western Oil Corporation has a structure
of capital formed by a debt of $250,000 at 16% annual interest and 2,000 shares
common. The company pays taxes at a rate of 40%
1. With the values of $80,000 and $120,000 of UAII, determine the related UPA.
2. With a UAII of $80,000 as a base, calculate the degree of financial leverage GAF
3. Solve parts A and B, assuming that the company has a debt of $100,000.
annual interest of 16% and 3,000 common shares.
Example 1
The inventory turnover of Barnstead industries is eight times a year; the
the company has an average payment period of 35 days and a collection period of
60 days. The annual investment required for the company's operating cycle is a
total disbursement of $3.5 million. If it is assumed that the year has 360 days:
1. Calculate the operating cycle and the cash conversion cycle of the company.
2. Determine the company's daily cash operating expenditure.
How much negotiated financing do you need to support your conversion cycle?
cash?
3. If the company pays 14% of its financing, how much would it increase its profits?
annual by favorably changing its current cash conversion cycle by 20 days?
Example 2
The inventory turnover of Hubbard Corporation is 6 times a year. The company has
an average collection period of 45 days and an average payment period of 30 days. The investment
annual for the operating cycle is $ 3 million. If it is assumed that the year has 360 days:
1. Calculate the cash conversion cycle of the company, its operating expense in
daily cash and the amount of negotiated financing required to support it
cash conversion cycle.
2. Determine the cash conversion cycle and financing needs
company negotiated, if the following changes are made simultaneously:
a).- Shorten the average inventory age by 5 days
It accelerates the collection of accounts by an average of 10 days.
c).- Extend the average payment period by 10 days
3. If the company pays 13% for its negotiated financing, how much would it increase its
annual utility as a result of the changes indicated in subsection B).
4. If the annual cost to obtain the annual profit from section C is $35,000, what action
Would you recommend the company? Why?
Cash conversion cycle American Products wishes
manage your cash efficiently. On average, your
inventories are 90 days old and their accounts for
invoices are charged in 60 days. Accounts payable are paid.
approximately 30 days after they originated.
Example 1
Helen Bowers, the new credit administrator of Muscarella Corporation, is
he was alarmed to discover that Muscarella sells on net credit terms of 50 days, while the
Credit terms extended to the entire industry have decreased to net 30 days.
Regarding annual credit sales of three million dollars, Muscarella has
currently an average of 60 days of sales in accounts receivable: Bowers
It is estimated that the restriction of credit terms to 30 days would reduce sales.
annual to 2.6 million dollars; but accounts receivable would decrease to 35
sales days, and the savings on investments in accounts receivable should
overcome any loss of profits.
Muscarella's variable cost rate is 70%, and its marginal tax rate is
40%. If the interest rate on funds invested in accounts receivable is 11%,
Should the change in the credit terms be made?
Example 2
Bay Technologies is considering changing its credit terms from 2/15, net
30 to 3/10, net 30, with the aim of accelerating their collection. Currently, 40% of
The company's customers take advantage of the 2% discount. According to the
new terms, it is expected that the customers who accept the discount will amount to
50%. Regardless of the credit terms, half of the
clients who do not take advantage of the credit do not pay on time, while the rest
will pay ten days later. The change does not apply the relaxation of the rules of
credit: therefore, it is expected that losses from delinquent accounts do not exceed
its current level of 2%. However, more generous terms are expected
cash discount increased sales from two to 2.6 million dollars
per year. The company's variable cost ratio is 75%, the interest rate on
the funds invested in accounts receivable is 9% and the marginal tax rate of the
the company is 40%.
What will be the pending collection sales days before and after the change?
Do I calculate the costs of the discounts taken before and after the change?
Calculate the cost in dollars of maintaining accounts receivable before and
after the change?
Calculate the losses from delinquent accounts before and after the change?
What will be the additional utility from the change in credit terms?
Should the company change its credit terms?
Example 1
The following inventory data has been established for Thompson Company:
Orders should be placed in multiples of 100 units; Annual sales will be 338,000.
units; the purchase price per unit will be six dollars; The maintenance cost will be
20% of the purchase price of goods; The fixed ordering cost will be 48 dollars; It
they will require three days for delivery.
What will be the monetary amount of the order?
How many orders should Thompson Company place each year?
At what inventory level should an order be placed?
Calculate the total cost of maintenance and organization of inventories, if the quantity
ordered in an order is:
4,000 units;
2) 4,800 units, or
6,000 units,
What will the total costs be if the number of units in the order is equal to the quantity?
economic of the order?
Example 2
Computer Supplier Inc. must order floppy disks from its supplier in batches of ten.
boxes. Given the information we provided, complete the following table and determine the
economic amount of the order of diskettes from Computer Supplier Inc.
Annual demand 26,000.00 dozens D
Cost per order placed $30.00 Cp
Maintenance cost 20.00% Cm
Price per dozen $7.80 Cu
Size of the 250 500 1000 2000 13000 26000
order
tens
Number of
orders (L)
Inventory
Average
Total cost of
maintenance
Total cost of
Sorting
Total cost