Bridgeton Industries: Automotive Component and Fabrication Plant By: Saurabh Saxena In 1985‚ Bridgeton Industries‚ a major supplier to Big-Three domestic automobile manufacturers‚ is facing a competitive environment with advent of foreign competition and rising gasoline prices‚ leading to shrinking pool of production contracts. Bridgeton reacts by closing ACF diesel engine plant and hiring strategic consulting firm to classify their products on competitive
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Contribution Margin and Break Even Analysis. Many factors come into play in determining business success. One of them is the financial factor. For a company to set financial goals it is crucial that its management know in detail the products or services they sale or provide. This is the analysis of two different scenarios at Aunt Connie ’s Cookies Simulation (University of Phoenix‚ 2011) and the financial performance of Jamestown Electric Supply Company (Heiter‚ et. al. 2008). During both analysis
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units. 2. The contribution margin per chair for the Colonial model is: A) $51. B) $16. C) $35. D) $25. The answer is b. CM = P-V = $60 - $35 - $9 = $16. Page 1 3. If the sales mix and sales units are as expected‚ the break-even in sales dollars is closest to: A) $132‚000. B) $148‚500. C) $143‚000. D) $139‚764. Price: Variable Costs: Contribution Margin: Contribution Margin Ratio: The answer is c. Colonial to Early American Sales Mix: 3:1 Weighted Average Contribution Margin Ratio: .75(.2667)
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Red Bull is the world famous energy drink‚ it has dominated as the leader of energy drink. Comparing with other energy drink companies‚ Red Bull holds the largest market share. Tracking back‚ Red Bull respectively occupied 42.6%‚ 35.2% and 40% of top energy drink market share from 2006 to 2008‚ in that duration‚ the following competitor is monster which respectively held 14.4%‚ 27.3% and 23% market share. Then‚ the volume of business that Red Bull made was 2200 millions‚ 2300 millions and 2950
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proposed by the consultant. 3. Which system is preferable? Why? 4. Would you recommend any changes to the system you prefer? Why? 5. Would you treat the new machine as a separate cost center or as a part of the main test room? Bridgeton Industries: Automotive Component & Fabrication Plant 1. The official overhead allocation rate used in the 1987 model year strategy study at the Automotive Component and Fabrication Plant (ACF) was 435% of direct labor cost. Calculate the overhead allocation
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Bridgeton Industries: Automotive Component and Fabrication Plant 3. Calculate the expected gross margins as a percentage of selling price on each product based on the 1998 and 1990 model year budgets assuming selling price and material and labor cost do not change from standard. *See Exhibit 1 for calculations To calculate the expected gross margins as a percentage of selling price‚ first we will need to calculate the total overhead (burden) for years 1988 and 1990. For year 1988‚ the total
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change in overhead costs. According to the case‚ the decision to outsource Muffler-exhaust systems and oil pans was based on the model without overhead allocation. Overlooking the overhead allocation represented a nightmare in analysis and led Bridgeton face falling profits. To further explore the problems‚ we allocate overhead costs into each products for getting the true profits and the ROS: Profit By Segment 1987 1988 1989 1990 Fuel Tanks 32‚849 36‚767 33‚703 35‚956 Manifolds
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behavior is vital to the manager’s decision-making role‚ because one of the main goals of management accounting is controlling costs. 15 Cost-Volume-Profit Analysis 1. 2. 3. 4. 5. 6. The Profit Equation Breakeven Point Margin of Safety Contribution Margin Contribution Margin Ratio What-if Analysis The Profit Equation Profit = SP(x) –VC(x) – TFC X = Quantity of units produced and sold SP = Selling price per unit VC = Variable cost per unit TFC = Total fixed cost Break-Even Point The break-even
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1. The following is Addison Corporation’s contribution format income statement for last month: Sales $1‚000‚000 Less: Variable Expenses $ 700‚000 Contribution Margin $ 300‚000 Less: Fixed Expenses $ 180‚000 Operating Income $ 120‚000 The company has no beginning or ending inventories. A total of 20‚000 units were produced and sold last month. What is the company’s margin of safety in dollars? $400 000 10 points
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Bridgeton Industries: Automotive Component & Fabrication Plant The Automotive Component and Fabrication Plant (ACF) was the original plant site for Bridgeton Industries‚ a major supplier of components for the domestic automotive industry. It manufactured fuel tanks‚ manifolds‚ doors‚ muffler/exhausts and oil pans. All its products were sold to Big Three domestic automobile manufactures. Competition was from local suppliers and other Bridgeton plants. The plant well grew and developed as far as
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