Base off of the below information: write an official memo to the
president of this company to disclose the findings and possible
recommendations: (Analyze the impact of the break even point in #3
and #5. Do you support the decision made? why or why not? AND
Perform an analysis on the current and proposed sales compensation
structure. What strategies can be implemented in the sales
commission structure to result in increased profits and efficiency
for the company?) What
needs to go in the memo is this: *Analyze the impact of the break
even point in #3 and #5. Do you support the decision made? why or
why not? (the work is listed below) and *Perform an analysis on the
current and proposed sales compensation structure. What strategies
can be implemented in the sales commission structure to result in
increased profits and efficiency for the
company?)
January
European Standard
Sales ($200 x 10,000)= $2,000,000
Variable Exp. ($110 x 10,000=$1,100,000 + $20 x 10,000=
$200,000)=$1,300,000
Contribution Margin: ($2,000,000- $1,300,000)= $700,000
Fixed Exp.: $420,000 (given)
Net Operating Income: ($700,000-$420,000)=$280,000
European Deluxe
Sales: ($300 x 5,000) =$1,500,000
Variable Exp. ($210 x 5,000=$1,050,000 + $30 x 5,000=$150,000) =
$1,200,000
Contribution Margin: ($1,500,000-$1,200,000) = $300,000
Fixed Exp.: $420,000 (given)
Net Operating Loss: ($300,000-$420,000) = -$120,000
Total
Sales: ($2,000,000 + $1,500,000) = $3,500,000
(100%)
Variable Exp. ($1,300,000 + $1,200,000) =$2,500,000 (71%)
Contribution Margin: ($3,500,000 – $2,500,000) =$1,000,000
(29%)
Fixed Exp: $420,000 (given)
Net Operating Income: ($1,000,000 – $420,000) = $580,000
February
European Standard
Sales: ($200 x 5,000) = $1,000,000
Variable Exp. ($110 x 5,000=$550,000 + $20 x 5,000=$100,000)
=$650,000
Contribution Margin: ($1,000,000-$650,000) =$350,000
Fixed Exp.: $420,000 (given)
Net Operating Loss: ($350,000- $420,000) = -$70,000
European Deluxe
Sales: ($300 x 10,000) = $3,000,000
Variable Exp. ($210 x 10,000= $2,100,000 + $30 x
10,000=$300,000) =$2,400,000
Contribution Margin: ($3,000,000-$2,400,000) =$600,000
Fixed Exp.: $420,000 (given)
Net Operating Income: ($600,000-$420,000) =$180,000
Total
Sales: ($1,000,000 + $3,000,000) = $4,000,000 (100%)
Variable Exp. ($650,000 + $2,400,000) = $3,050,000 (76%)
Contribution Margin: ($350,000 + $600,000) = $950,000 (24%)
Fixed Exp.: $420,000 (given)
Net Operating Income: ($950,000-$420,000) = $530,000
2. January
Dollar Sales= Fixed Exp./Contribution Margin Ratio
$420,000/29%=$1,448,275.86
February
Dollar Sales= Fixed Exp./Contribution Margin Ratio
$420,000/24%=$1,750,000.00
3. March
European Standard
Sales: ($200 x 5,000) = $1,000,000
Variable Exp. ($110 x 5,000= $550,000 + $20 x 5,000=$100,000) =
$650,000
Contribution Margin: ($1,000,000-$650,000) =$350,000
Fixed Exp.: $420,000 (given)
Net Operating Loss: ($350,000 – $420,000) = $-70,000
European Deluxe
Sales: ($300 x 15,500)= $4,650,000
Variable Exp. ($255 x 15,500=$3,952,500 + $30 x 15,500=$465,000)
= $4,417,500
Contribution Margin: ($4,650,000-$4,417,500) = $232,500
Fixed Exp.: $420,000 (given)
Net Operating Loss: ($232,500-$420,000) = -$187,500
Total
Sales: ($1,000,000 + $4,650,000)=$5,650,000 (100%)
Variable Exp. ($650,000 + $4,417,500)= $5,067,500 (90%)
Contribution Margin: ($5,650,000-$5,067,500) = $582,500
(10%)
Fixed Exp.: $420,000 (given)
Net Operating Income: ($582,500-$420,000)=$162,500
4. March
Dollar Sales= Fixed Exp./Contribution Margin Ratio
$420,000/10%=$4,200,000
5. European Standard
Sales: ($200 x 5,000) =$1,000,000
Variable Exp. ($110 x 5,000) = $550,000
Contribution Margin: ($1,000,000-$550,000) = $450,000
Fixed Exp.: ($420,000 + $450,000)= $870,000
Net Operating Loss: ($450,000-$870,000) = -$420,000
European Deluxe
Sales: ($300 x 15,500) = $4,650,000
Variable Exp. ($255 x 15,500) = $3,952,500
Contribution Margin: ($4,650,000-$4,417,500) = $697,500
Fixed Exp.: ($420,000 + $450,000) = $870,000
Net Operating Loss: ($232,500-$420,000) = -$187,500
Total
Sales: ($1,000,000 + $4,650,000) = $5,650,000 (100%)
Variable Exp. ($550,000 + $3,952,500) = $4,502,500 (80%)
Contribution Margin: ($5,650,000- $4,502,500) = $1,147,500
(20%)
Fixed Exp.: ($420,000 + $450,000) = $870,000
Net Operating Income: ($1,147,500 – $870,000) = $277,500
Dollar Sales= Fixed Exp./Contribution Margin Ratio
$870,000/20%=$4,350,000
