Question
In: Operations Management
Menen Quality Manufacturers has recently hired a new manager called Mr Freddy who is in charge...
Menen Quality Manufacturers has recently hired a new manager called Mr Freddy who is in charge of both production and sales of products. You had a chance to meet Mr Freddy and discussed cost-volume-profit analysis. During the discussion, Mr Freddy told you that his focus for the coming five years is to put some effort in order to achieve breakeven point so that the company achieves its objectives. He said nothing is needed beyond that and asked you to express your opinion on his position. Do you agree with his plan? Briefly explain why or why not.
Solutions
Expert Solution
The Break-even point is the point where total expenses equal to the total revenue. Let us understand this by the given graph.
The following interpretations are drawn from the above graph.
- A fixed cost of 2200(approx) has incurred for the company even if the sales volume is zero.
- Variable cost starts as the sales volume increase from zero to 5000.
- Therefore a total cost line comes into the picture which is the sum of variable cost and the fixed cost.
- A point of time comes when total sales(Revenue generated) considers the total cost.
- This is the point when no profit no loss situation arises for the company . This is called BEP(Break-even point).
- Profit starts after the break-even point only. Below the BEP the company suffers the loss.
Conclusion
The focus of Mr teddy only on BEP and nothing is a need beyond that is not a correct concept. Because after achieving the BEP the company starts earning. The company suffers loss below BEP .During 5 years if Mr Teddy achieve the BEP means that he has covered up the losses ,now whatever will he achieve beyond BEP will be a profit for the company.
keosha answered 8 months agoRelated Solutions
The company has just hired a new marketing manager who insists that unit sales can be...
The company has just hired a new marketing manager who insists
that unit sales can be dramatically increased by dropping the
selling price from $8 to $7. The marketing manager would like to
use the following projections in the budget:
Data
Year 2 Quarter
Year 3 Quarter
1
2
3
4
1
2
Budgeted unit sales
50,000
65,000
115,000
70,000
80,000
90,000
Selling price per unit
$7
per unit
Chapter 7: Applying Excel
2
3...
The company has just hired a new marketing manager who insists that unit sales can be...
The company has just hired a new marketing manager who insists
that unit sales can be dramatically increased by dropping the
selling price from $8 to $7. The marketing manager would like to
use the following projections in the budget:
Year 2 Quarter
Year 3 Quarter
Data
1
2
3
4
1
2
Budgeted unit sales
50,000
70,000
120,000
60,000
80,000
95,000
Selling price per unit
$7
Chapter 8: Applying Excel
Data
Year 2 Quarter
Year 3 Quarter
1
2...
The company has just hired a new marketing manager who insists that unit sales can be...
The company has just hired a new marketing manager who insists
that unit sales can be dramatically increased by dropping the
selling price from $8 to $7. The marketing manager would like to
use the following projections in the budget:
Data
Year 2 Quarter
Year 3 Quarter
1
2
3
4
1
2
Budgeted unit
sales
45,000
70,000
110,000
75,000
90,000
95,000
Selling price per
unit
$7
per unit
A
B
C
D
E
F
F...
The company has just hired a new marketing manager who insists that unit sales can be...
The company has just hired a new marketing manager who insists
that unit sales can be dramatically increased by dropping the
selling price from $8 to $7. The marketing manager would like to
use the following projections in the budget: Year 2 Quarter Year 3
Quarter Data 1 2 3 4 1 2 Budgeted unit sales 45,000 70,000 120,000
70,000 90,000 90,000 Selling price per unit $7 1 2 3 4 5 6 7 8 9 10
11 12 13...
The company has just hired a new marketing manager who insists that unit sales can be...
The company has just hired a new marketing manager who insists
that unit sales can be dramatically increased by dropping the
selling price from $8 to $7. The marketing manager would like to
use the following projections in the budget:
Year 2 Quarter
Year 3 Quarter
Data
1
2
3
4
1
2
Budgeted unit sales
50,000
65,000
110,000
65,000
85,000
100,000
Selling price per unit
$7
1
2
3
4
5
6
7
8
9
10
11
12
13...
The company has just hired a new marketing manager who insists that unit sales can be...
The company has just hired a new marketing manager who insists
that unit sales can be dramatically increased by dropping the
selling price from $8 to $7. The marketing manager would like to
use the following projections in the budget:
Year 2 Quarter
Year 3 Quarter
Data
1
2
3
4
1
2
Budgeted unit
sales
45,000
70,000
105,000
75,000
85,000
90,000
Selling price per unit
$7
A
B
C
D
E
F
G
1
2
3
4
5
6...
The company has just hired a new marketing manager who insists that unit sales can be...
The company has just hired a new marketing manager who insists
that unit sales can be dramatically increased by dropping the
selling price from $8 to $7. The marketing manager would like to
use the following projections in the budget: Data Year 2 Quarter
Year 3 Quarter 1 2 3 4 1 2 Budgeted unit sales 45,000 65,000
105,000 60,000 90,000 90,000 Selling price per unit $7 per unit
A
B
C
D
E
F
F
1
Chapter 9: Applying...
Requirement 2: The company has just hired a new marketing manager who insists that unit sales...
Requirement 2:
The company has just hired a new marketing manager who insists
that unit sales can be dramatically increased by dropping the
selling price from $8 to $7. The marketing manager would like to
use the following projections in the budget:
Year 2 Quarter
Year 3 Quarter
Data
1
2
3
4
1
2
Budgeted unit
sales
50,000
65,000
115,000
70,000
85,000
100,000
Selling price per unit
$7
A
B
C
D
E
F
G
1
2
3
4...
Requirement 2: The company has just hired a new marketing manager who insists that unit sales...
Requirement
2:
The company has just hired a new marketing manager who insists
that unit sales can be dramatically increased by dropping the
selling price from $8 to $7. The marketing manager would like to
use the following projections in the budget:
Data
Year 2 Quarter
Year 3 Quarter
1
2
3
4
1
2
Budgeted unit
sales
50,000
65,000
105,000
60,000
85,000
95,000
Selling price per
unit
$7
per unit
Chapter 7: Applying...
Requirement 2: The company has just hired a new marketing manager who insists that unit sales...
Requirement
2:
The company has just hired a new marketing manager who insists
that unit sales can be dramatically increased by dropping the
selling price from $8 to $7. The marketing manager would like to
use the following projections in the budget:
Data
Year 2 Quarter
Year 3 Quarter
1
2
3
4
1
2
Budgeted unit
sales
50,000
65,000
105,000
60,000
85,000
95,000
Selling price per
unit
$7
per unit
1
Chapter 7:...
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