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Calibrated Manufacturing Essay

892 words - 4 pages

Calibrated Manufacturing

Calibrated Manufacturing makes an electronic component that is in great demand. The component sells for $20 each. Calibrated's current capacity is 10,000 units per week. For the last few months, however, the company has been receiving new orders at a rate of 14,000 units per week, and now has a substantial backlog. The company expects this order rate to continue, if it maintains its price. Calibrated's current operating data follows:

Sales Revenue $200,000
Variable Costs 100,000
Fixed Costs 80,000
Pretax Profit 20,000

For each incremental addition of 500 units of output weekly, Calibrated would need to purchase new equipment ...view middle of the document...

Prepare an analysis of a 10% price increase.
. Calculate the break-even sales quantity (percent and units).
. Calculate the new $ contribution margin per unit.

|Particulars |Amount |Amount |
|Sales | $ 200,000 | $ 308,000 |
|Less- Variable Cost | $ 100,000 | $ 140,000 |
|Contribution | $ 100,000 | $ 168,000 |
|Fixed Cost | $ 80,000 | $ 92,000 |
|Profit | $ 20,000 | $ 76,000 |

Break even points = fixed costs/contribution per unit
Present = 80000/10 = 8000 units
Proposed = 92000/10 = 9200 units

New contribution margin = total contribution/number of units
140000/14000 = $10 per unit

3. Develop a break-even table showing the change in Profit Contribution for changes in sales between -5% and -30%. To do this, you will need to determine first:
. What is the baseline "initial sales" from which you are beginning?
. From that baseline, how would you treat the semi-fixed costs?
. Are they additions to cost (positive numbers) or are they savings (negative numbers)?
. What does the column labeled "Change in Profit Contribution" mean here? What is it a change from?

…a lost cause for me..

4. If Calibrated believes that orders will fall off by no more than 15% following a 10% price increase, should it go through with the price increase or should it hold the price constant and meet all the excess demand with an increase in production?

|Particulars |Amount |Amount |
|Sales | $ 200,000 | $ 261,800 |
|Less- Variable Cost | $ 100,000 | $ 119,000 ...

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