Preview

Beauregard Textile

Satisfactory Essays
Open Document
Open Document
482 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Beauregard Textile
Economic Memo 3
Beauregard Textile Company Case

1) If Beauregard Textile Company dropped its price on T-30 from $4/yard to $3/yard, its profitability will increase, assuming Calhoun & Pritchard maintains its current pricing at $3/yard.
The relevant costs for this analysis are Direct Labor, Material, Material Spoilage, and Direct Department expense.
Other expenses are sunk costs and have been allocated to T 30 costs in the case data.. Some of these have been done by following accounting rules to cover costs that overlap with other items. These items are excluded from the cost calculation and include General Overhead, Selling and Administration and Indirect Department Expense.
Assumptions and observations:
The total market demand is stable at approximately 225,000 yards.
Customers switch suppliers based on lower price.

BTC C & P
Price $4.00 $3.00
Direct Labor .800 .740
Material .400 .400
Material Spoilage .040 .038
Direct Dept Expense .120 .100

Total Relevant Costs/yard 1.36 1.28
Profit 2.64 1.72
Total 75000yds $198,000 15000yds
$258,000
Table 1 BTC at $4/yard and P & C at $3/yard

BTC C & P
Price $3.00 $3.00
Direct Labor .760 .780
Material .400 .400
Material Spoilage .038 .040
Direct Dept Expense .100 .112

Total Relevant Costs/yard 1.30 1.33
Profit/yd 1.70 1.67
Total 125000yds
S212,500 100,000yds
$167,000
Table 2 Beauregard Textile and Calhoun & Pritchard at $3.00/yard
From the above tables it can be seen that Beauregard will increase its profits from $198,000 to 212,500 by decreasing its price to $3.00. The increased profit comes from increased market share.
2) If Calhoun & Pritchard decide to raise its price from $3/yard to $4/yard, and Beauregard Textile Company maintains $4/yard, BTC’s profitability will increase.
If C & P raise their price to

You May Also Find These Documents Helpful

  • Good Essays

    A E Bridal Case

    • 747 Words
    • 3 Pages

    Profits have generally increased over the years as Bridal’s name has become better known and as…

    • 747 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Acc/531 Week 4

    • 623 Words
    • 3 Pages

    2) Which of the following non value-added costs associated with manufactured work in process inventory is most significant?…

    • 623 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Fee Setting

    • 471 Words
    • 2 Pages

    My Break-Even point and go/no go decision is set at 30 participants. It is set lower so that if we exceed more than thirty participants then the rest would be a profit.…

    • 471 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Augustine Medical

    • 817 Words
    • 4 Pages

    Penetration strategy – assuming the price of blankets as $18 , we are able to calculate just 0.3$ per unit, which will result in less profit generation(exhibit 4)…

    • 817 Words
    • 4 Pages
    Satisfactory Essays
  • Good Essays

    Booker Jones

    • 1108 Words
    • 5 Pages

    Booker Jones increased production by 20,000 barrels. If the cost of barrels is $31.50, then these 20,000 barrels would cost $630,000. This will be added to inventory account and hence will generate pretax profit of $630,000 – 407,000 = $223,000.…

    • 1108 Words
    • 5 Pages
    Good Essays
  • Satisfactory Essays

    Option #1 –Truman could have relied on relentless b-29 bombing raids on Japanese cities combine with naval blockade to wear down Japanese resistance and force their surrender. Advantages – 1. Would had led to the Japanese surrender 2. Gained full control over Japanese Disadvantages – 1. Put troops, pilots, and sailors at risk 2.…

    • 311 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Superior Manufacturing

    • 1615 Words
    • 7 Pages

    The objective of this question is to explore if there is a suitable price that generates a positive net profit to the company. In order to find a net profit, the figures of Sales, Variable Costs, and Fixed Costs are required for a calculation. We can find those figures by using the following formulas. Table 2 below can be used as a reference.…

    • 1615 Words
    • 7 Pages
    Powerful Essays
  • Good Essays

    Pricing Strategy

    • 806 Words
    • 4 Pages

    Please answer the following questions. DO NOT calculate the profitability of these changes by calculating profit levels before and after the changes, spreadsheet style. That approach would take four times longer and not show me that you understand the formulas. Use the simple concept of contribution to calculate just the change in profits due to the proposed price changes.…

    • 806 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    Worldwide Paper

    • 1938 Words
    • 6 Pages

    The main purpose of the project is to save on operational costs by producing shortwood. The cost savings is estimated to be $2 million in the first year and $3.5 million in the following five years. In addition, the longwood yard would provide enough capacity to allow Blue Ridge Mill to sell shortwood on the market. Bob Prescott confidently estimates that shortwood sales in 2008 will be $4 million, and will increase to…

    • 1938 Words
    • 6 Pages
    Powerful Essays
  • Powerful Essays

    Horniman Horticulture

    • 1201 Words
    • 5 Pages

    Horniman Horticulture (Horniman) revenue growth is increasing since 2003 it showing a rapid growth then the industry benchmark, which is decreasing by 1.8% per year. In 2004 and 2005 Horniman is constantly growing with increase in the revenue from 2.4% in 2003 to 12.5% in 2005 and 15.5% in 2005 as well as increase in total asset net profit and return on equity respectively, which indicate that it’s doing well within the industry. As we can see in exhibit 1 They have stabilized depreciation as its only rose 20% from 2003 to 2005 (38.4 to 40.9) . The same goes for tax expanse it hasn’t change much by staying around 34 to 34%. One of the Key strength of Bob Brown in regard to management is that he has a good relationship with the employee and customer.…

    • 1201 Words
    • 5 Pages
    Powerful Essays
  • Satisfactory Essays

    c) The range over which the unit profit for oak chairs can change without changing the production plan is between $35 and infinity.…

    • 202 Words
    • 19 Pages
    Satisfactory Essays
  • Good Essays

    Pepe Jean Case

    • 850 Words
    • 4 Pages

    Profit before taxes (PBT) at the rate of 32%, which means the there will be an profit increase based on the extra 10% sales…

    • 850 Words
    • 4 Pages
    Good Essays