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The document provides a financial analysis for Cascade Company, detailing sales, costs, and breakeven points for Products A, B, and E. It also compares operating leverage between Jones Inc. and Wilson Inc., highlighting their sales, variable costs, and income from operations. Additionally, it includes a margin of safety calculation based on sales data.

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14 views4 pages

SCVPR

The document provides a financial analysis for Cascade Company, detailing sales, costs, and breakeven points for Products A, B, and E. It also compares operating leverage between Jones Inc. and Wilson Inc., highlighting their sales, variable costs, and income from operations. Additionally, it includes a margin of safety calculation based on sales data.

Uploaded by

neppysahipa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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To illustrate, assume that Cascade Company sold Products A and B during the past years as follows:

Total Fixed Cost $ 200,000.00

Product A Product B
Unit selling price $ 90.00 $ 140.00
Unit variable cost $ 70.00 $ 95.00
Unit contribution margin $ 20.00 $ 45.00
Units sold $ 8,000.00 $ 2,000.00
Sales mix 80% 20%

Product E
Unit selling price of E $ 100.00
Unit variable cost of E $ 75.00
Unit contribution margin of E $ 25.00

Breakeven Sales per unit for E $ 8,000.00

A B
Breakeven quantity $ 6,400.00 $ 1,600.00

Breakeven Analysis
Product A Product B

Sales:
6,400 units x 90 $ 576,000.00
1,600 units x 140 $ 224,000.00
Total sales $ 576,000.00 $ 224,000.00
Variable costs:
6,400 units x 70 $ 448,000.00
1,600 units x 95 $ 152,000.00
Total variable costs $ 448,000.00 $ 152,000.00
Contribution margin $ 128,000.00 $ 72,000.00
Fixed costs
Income from operations
the past years as follows:

Total

10,000

Total

$ 576,000.00
$ 224,000.00
$ 800,000.00

$ 448,000.00
$ 152,000.00
$ 600,000.00
$ 200,000.00
$ 200,000.00
$ -
To illustrate operating leverage, assume the following data for Jones Inc. and Wilson Inc.:

Jones Inc. Wilson Inc.


Sales $ 400,000.00 $ 400,000.00
Variable costs 300,000.00 300,000.00
Contribution margin $ 100,000.00 $ 100,000.00
Fixed costs 80,000.00 50,000.00
Income from operations $ 20,000.00 $ 50,000.00

Operating leverage $ 5.00 $ 2.00


Increased in sales 10% 10%
Percentage change in sales 50% 20%

Sales $ 440,000.00 $ 440,000.00


Variable costs 330,000.00 330,000.00
Contribution margin $ 110,000.00 $ 110,000.00
Fixed costs 80,000.00 50,000.00
Income from operations $ 30,000.00 $ 60,000.00
To illustrate, assume the following data:

Sales $ 250,000.00
Sales at the breakeven point 200,000.00
Unit selling price 25.00

Margin of Safety 20%

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