Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / You are a consultants on a multi-year basis for a global washer and dryer manufacturer

You are a consultants on a multi-year basis for a global washer and dryer manufacturer

Accounting

You are a consultants on a multi-year basis for a global washer and dryer manufacturer. They currently offer two core washer and dryer sets: a high-end model and an economic model. You are tasked to complete several calculations and present your findings to the company stakeholders.

Question 1 management has provided the following revenue and cost information:

High-End Set Economical Set

Sales price     $3,500  per unit     $1,000  per unit  

Labor    $875  per unit   $250  per unit

Materials    $1400  per unit   $300  per unit

Direct fixed costs     $25,000   per month    $16,500 per month

Allocated fixed costs    $85,000  per month   $85,000  per month

 

They want a better understanding of their business to make budgeting and sales goals decisions and have asked you to determine their:

1.     Contribution Margins for each product line

2.     Break-even quantities for each product line

3.     Break-even quantities to earn $500,000 per year margin on the high-end line (at the current sales price)

4.     Break-even quantities to earn $300,000 per year margin on the economical line (at the current sales price)

They expect the product lines to fully absorb the costs allocated to them. They have also asked that you show each step in your calculations so that they can understand your analysis.

Once you have determined these amounts, they have asked that you:

·        present the information

·        describe how you performed your calculations

·        and explain what the results mean

Question 2 the company is considering the purchase of machinery and equipment to set up a line to produce a combination washer-dryer. They have given you the following information to analyze the project on a 5-year timeline: 

·        Initial cash outlay is $150,000, no residual value.

·        Sales price is expected to be $2,250 per unit, with $595 per unit in labor expense and $795 per unit in materials.

·        Direct fixed costs are estimated to run $20,750 per month.

·        Cost of capital is 8%, and the required rate of return is 10%.

·        They will incur all operational costs in Year 1, though sales are expected to be 55% of break-even.

·        Break-even (considering only direct fixed costs) is expected to occur in Year 2.

·        Variable costs will increase 2% each year, starting in Year 3. 

·        Sales are estimated to grow by 10%, 15%, and 20% for years 3 - 5.

They have asked you to calculate:

·        The product's contribution margin

·        Break-even quantity

·        NPV

·        IRR

Once you have determined these amounts, they have asked that you present the information, describe how you performed your calculations, and explain what the results mean.

After you have completed the calculations and presented your work, management makes the investment. 

·        Explain how the project analyses do or do not support this decision. 

·        In either case, what are the factors that should have been considered in management's decision?

Question 3 After the combo washer-dryer has been in production for a few years, you are asked to perform another analysis. You must evaluate the performance of all three product lines as management is concerned with the viability of the washer-dryer combination product. They provide you with the latest annual information by product:

  High-End Set  Economical Set  W/D Combo  Total

 Sales $4,700,000  $4,060,000  $880,000     $9,640,000

 Labor $(1,250,000)   $(1,015,000)   $(235,000)   $(2,500,000)

 Materials $(1,885,000) $(1,220,000)   $(315,000) $(3,420,000)

 Direct fixed costs   $(325,000)  $(220,000) $(250,000) $(795,000)

 Allocated fixed costs $(650,000) $(650,000) $(650,000) $(1,950,000)

 Net Income    $590,000   $955,000   $(570,000)   $975,000

 

You are asked to perform an analysis to determine whether to drop or keep the washer-dryer combination product and present your findings, including the steps taken to make your determination. You are also asked to evaluate if the costing methodology is appropriate and, if not, recommend alternative methods.

 

Please describe the circumstances of the case study and make the required recommendations. Explain your approaches to the problems, perform relevant calculations and analyses, and justify your recommendations. Evaluate the results and explain what each calculated value means. Ensure your work and conclusions are thoroughly supported.

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE