Posted: September 16th, 2017
Cheryl Montoya picked up the phone and called her boss, Wes Chan, Vice President of Marketing at Piedmont Fasteners Corporation.Cheryl: “Wes, I’m not sure how to go about answering the questions that came up at the meeting with the President yesterday.”Wes: “What’s the problem?”Cheryl: “The president wanted to know the break-even point for each of the company’s products, but I am having trouble figuring them out.”Wes: “I’m sure you can handle it, Cheryl. And, by the way, I need your analysis on my desk tomorrow morning at 8:00 sharp in time for the follow-up meeting at 9:00.”Piedmont Fasteners Corporation makes three different clothing fasteners at its manufacturing facility in North Carolina. Data concerning these products appear below:
Velcro Metal Nylon Normal annual sales volume100,000 units 200,000 units 400,000 units Unit selling price $1.65 $1.50 $0.85 Variable cost per unit $1.25 $0.70 $0.25 Total fixed expenses are $400,000 per year.All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptably large numbers of customers.The company has a very effective lean production system, so there is no beginning or ending work in process or finished-goods inventories.
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