Bill French case solved questions

Bill French case
In this case, Bill French had gathered information and calculated Break Even Point (BEP) based on few assumptions:
1) Product mix considered constant.
2) Considered that there is just one breakeven point for the company.
3) Fixed and variable cost is assumed to be constant.
4) No inventory.
5) Price assumed to be fixed.
Calculation of breakeven point based on assumptions:

Table 1: Initial Cost analysis
Initial Calculation
Aggregates
A'
B'
C'
Sales at full capacity
(Unit)
2000000

Sales unit
1500000
600000
400000
500000
Unit price
7.2
10
9
2.4
Revenue
10800000
6000000
3600000
1200000
Variable cost/unit
4.5
7.5
3.75
1.5
Contribution margin/unit
2.7
2.5
5.25
0.9
Total variable cost
6750000
4500000
1500000
750000
Fixed cost
2970000
960000
1560000
450000
Fixed cost/unit
1.98
1.6
3.9
0.9
Profit
1080000
540000
540000
0
Ratios:
Variable cost to sales
0.625
0.75
0.41666667
0.625 unit contribution to sales
0.375
0.25
0.58333333
0.375
Utilization to capacity
75.00%
30.00%
20.00%
25.00%
BEP (units)
1100000
384000
297142.857
500000

Bill French calculation need to be revised, given below are the considerations:
1) Product ‘A’ volume reduced to 1/3.
2) Product ‘C’ sales unit increased with 450000
3) Increase in selling price of ‘C’ to 100%
4) Cost will remain same for each product
5) Will boost fixed cost of at least by $60,000 month.
6) Dealing with 3 basic products, different calculation for each product.
7) Consideration of tax, dividends and expected union demands.
Calculation of breakeven point based on new consideration:

Table 2 : Revised Cost analysis
Revised calculation
Aggregates
A'
B'
C'
Sales at full capacity
(Unit)
2000000

Sales unit
1750000
400000
400000
950000
Unit price
6.94857143
10
9
4.8
Revenue
12160000
4000000
3600000
4560000
Variable cost/unit
3.38571429
7.5
3.75
1.5
Contribution margin/unit
3.56285714
2.5
5.25
3.3
Total variable cost
5925000
3000000
1500000
1425000
Fixed cost
3690000
960000
1560000
1170000
Profit before tax