Fer Unit Fer Unit Unit Manufacturing Costs Variable Materials 4 00 Variable Labo

MBA 6100 Case Study #1

Each question refers to the same initial data. Treat each Part individually. Ignore income taxes. Assume no beginning or ending inventories. Calculations and backup should be completed and submitted in Excel. Use proper Contribution Income Statement formatting – example below. Analysis can either be typed into cells in Excel (formatted to be easily legible) or typed into a text box in Excel. (This case study is worth 50 points total.)

Contribution Margin Format Example:

Data for all questions: Panalon produces cast iron dutch ovens (a deep pot with a lid that can be used on a stovetop or in the oven). Their pots are sold at many local department stores. The cost of manufacturing and marketing their pots, at their normal factory volume of 6,000 pots per month, is shown in the table below. These pots sell for $40 each. Panalon is making a small profit, but would prefer to increase profitability.

Hint: Fixed costs are shown on a per-unit basis in the table based on normal volume. However, fixed costs as a total do not change when volume changes, so you will need to determine total fixed costs first.

Data for all Questions:

Part 1: (12 points)

A) Prepare a Contribution Margin Income Statement for the company using the given financial data at their normal factory volume. Include line items for each type of cost as well as subtotals for the variable and fixed costs.

B) What is the break-even point in units? (Show your calculations.) 

C) What is the break-even point in sales dollars? (Show your calculations.) 

D) Using a Contribution Margin Income Statement, verify that your calculated break-even volume results in Operating Income of Zero. (Prepare the entire Contribution Margin statement at the break-even level.)

FEr UnitFEr UnitUnit Manufacturing Costs .Variable Materials4.00Variable Labor7.00Variable Overhead5. 00Fixed OverheadTotal Unit Manufacturing Costs*527.00Unit Marketing Costs "Variable Marketing Costs3.00FixEd Marketing Costs4.00Total Unit Marketing Costs`512.00