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introduction to managerial accounting - Case Study Example
Author : garmstrong
Finance & Accounting
Pages 3 (753 words)
Hacker Gulf operates in the highly competitive sporting goods industry. The firm must be able to perform a good assessment of the internal financial conditions of the company. Managerial accountants serve the role of being consultants to the executive management team…
Fixed expenses divided by the CM ratio calculates breakeven in terms of dollars. The profit of a company at the breakeven point is cero dollars (Peavler). Hacker Gulf has variable costs of $40 ($28 + $12) per unit. The monthly fixed expenses of the company are $24,000 per month. The fixed expenses of the company yearly are $288,000. The current sales price of the company is $70 per gulf club. The calculations below show the current breakeven point of the company in units and dollars. Fixed costs = 288000 Sales = 70 Variable cost = 40 Contribution margin = (70 – 40) = 30 Breakeven in units = 288000 / 30 = 9600 units CM ratio = 30/ 70 = 0.428 Breakeven in dollars = 288000 / 0.428 = $672,000 The breakeven point of Hacker Gulf is 9,600 units or $672,000. Based on the assumption that the company raises its sales price to $80 instead of $70 the breakeven point of the firm would change. A higher sales price will lower the breakeven point due to the fact that the contribution margin is larger. The calculation below shows the breakeven point of the firm under the assumption of a sales price at $80. ...