Hallstead Jewelers Case Analysis
Hallstead Jewelers
Managerial Accounting ACCT 2301 – Case Analysis 1
September 29, 2010
Melissa Ng
Variable costs are made up of cost of goods sold plus sales commissions. Fixed costs are made up of salaries, advertising, administrative expenses, rent, depreciation, and miscellaneous expenses.
Assuming all questions are answered independently: 1. Income statement using the contribution approach: | 2004 | 2005 | 2007 | Sales | $8,583,000 | $8,102,000 | $10,711,000 | Less: Variable Costs | $4,669,000 | $4,456,000 | $5,998,000 | Contribution Margin | $3,914,000 | $3,646,000 | $4,713,000 | Less: Fixed Costs | $3,180,000 | $3,283,000 | $4,971,000 | Net Income | $734,000 | $363,000 | $(258,000) |
Sales per unit: | 2004 | 2005 | 2007 | Sales Per Unit | $916 ($8,583,000/9,367) | $877 ($8,102,000/9,240) | $891 ($10,711,000/12,028) | Variable cost Per Unit | $498 ($4,669,000/9,367) | $482 ($4,456,000/9,240) | $499 ($5,998,000/12,028) | Contribution Margin Per Unit | $418 | $395 | $392 |
Sales per unit = Total sales/Number of sales tickets
Variable cost per unit = Total variable cost/Number of sales tickets
Contribution Margin per unit = Sales per unit – Variable cost per unit
Break-even points in units = Fixed cost/Contribution Margin per unit
Break-even points in dollars = Break-even points in units x Sales per unit | 2004 | 2005 | 2007 | Break even in units | 7,608 ($3,180,000/$418) | 8,309 ($3,282,000/$395) | 12,681 ($4,971,000/$392) | Break even in dollars | $6,976,536 ($917 x 7,608) | $7,286,993 ($877 x 8,309) | $12,440,061 ($981 x 12,681) |
Break-even point in number of sales tickets and break-even point in sales dollars increases from 2004 to 2005 and 2005 to 2007. This is due to the increase in fixed costs and the decrease in contribution margin, which overall results in an increase in break-even units, hence an increase in break-even dollars.
Managerial Accounting ACCT 2301 – Case Analysis 1
September 29, 2010
Melissa Ng
Variable costs are made up of cost of goods sold plus sales commissions. Fixed costs are made up of salaries, advertising, administrative expenses, rent, depreciation, and miscellaneous expenses.
Assuming all questions are answered independently: 1. Income statement using the contribution approach: | 2004 | 2005 | 2007 | Sales | $8,583,000 | $8,102,000 | $10,711,000 | Less: Variable Costs | $4,669,000 | $4,456,000 | $5,998,000 | Contribution Margin | $3,914,000 | $3,646,000 | $4,713,000 | Less: Fixed Costs | $3,180,000 | $3,283,000 | $4,971,000 | Net Income | $734,000 | $363,000 | $(258,000) |
Sales per unit: | 2004 | 2005 | 2007 | Sales Per Unit | $916 ($8,583,000/9,367) | $877 ($8,102,000/9,240) | $891 ($10,711,000/12,028) | Variable cost Per Unit | $498 ($4,669,000/9,367) | $482 ($4,456,000/9,240) | $499 ($5,998,000/12,028) | Contribution Margin Per Unit | $418 | $395 | $392 |
Sales per unit = Total sales/Number of sales tickets
Variable cost per unit = Total variable cost/Number of sales tickets
Contribution Margin per unit = Sales per unit – Variable cost per unit
Break-even points in units = Fixed cost/Contribution Margin per unit
Break-even points in dollars = Break-even points in units x Sales per unit | 2004 | 2005 | 2007 | Break even in units | 7,608 ($3,180,000/$418) | 8,309 ($3,282,000/$395) | 12,681 ($4,971,000/$392) | Break even in dollars | $6,976,536 ($917 x 7,608) | $7,286,993 ($877 x 8,309) | $12,440,061 ($981 x 12,681) |
Break-even point in number of sales tickets and break-even point in sales dollars increases from 2004 to 2005 and 2005 to 2007. This is due to the increase in fixed costs and the decrease in contribution margin, which overall results in an increase in break-even units, hence an increase in break-even dollars.