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Cost Model, Case Study Example

Pages: 3

Words: 930

Case Study

 

Revenues 35 70 105 140 175 210
 Feel So Good              1,631              3,263             4,894             6,525             8,157             9,788
 Dump the Pounds                 605              1,210             1,814             2,419             3,024             3,629
     Total revenues              2,236              4,472             6,708             8,945           11,181           13,417
 Cost of Goods Sold
 Raw materials – Feel so Good            365.14            730.28        1,095.41        1,460.55        1,825.69        2,190.83
 Raw materials – Dump the Pounds            208.99            417.98           626.98           835.97        1,044.96        1,253.95
 Production labor – Feel so Good            111.04            222.08           333.11           444.15           555.19           666.23
 Production labor – Dump the Pounds              88.83            177.66           266.49           355.32           444.15           532.98
 Production equipment depreciation – Feel So Good              11.81              23.63             35.44             47.25                  59             70.88
 Production equipment depreciation – Dump the Pounds                9.45              18.90             28.35             37.80             47.25             56.70
 Production utilities – Feel So Good              65.10            130.20           195.30           260.40           325.50           390.60
 Production utilities – Dump the Pounds              52.08            104.16           156.24           208.32           260.40           312.48
 Material handling, storage, shipping – per unit                   27                   55                  82                109                137                164
 Material handling, storage, shipping – per breakpoint              31.85            127.40           122.85           218.40           341.25           491.40
 Supervisor personnel costs              2,146              1,073                715                537                429                358
     Cost of Goods Sold              3,118              3,080             3,658             4,514             5,469             6,488
     Gross Profit                (882)              1,392             3,051             4,431             5,712             6,929
 Selling, General, and Administrative Expenses
 Administration                   55                   55                  55                  55                  55                  55
 Administrative utilities                   39                   39                  39                  39                  39                  39
 Marketing and promotion – Feel so Good                   77                   77                  77                  77                  77                  77
 Marketing and promotion – Dump the Pounds                   36                   36                  36                  36                  36                  36
 Research and Development                 301                 301                301                301                301                301
 Administrative depreciation                 156                 156                156                156                156                156
     Total Selling, General, and Admin Expenses                 664                 664                664                664                664                664
     Operating Income             (1,546)                 728             2,387             3,767             5,048             6,265

Break Even Point

Break even calculations
 total fixed cost/(total cost/price) FEEL SO GOOD                     8
 total fixed cost/(total cost/price) DUMP THE POUNDS                     3

Full Unit Cost for 140 Units

Strong Umbrella Unit Cost Calculation
 Cost Total Amount Feel So Good Dump the Pounds Explanation
 Units sold (in millions)         140.00          36.12       103.88  units sold are a proportion of the product sales percentage
 Raw materials         997.11        376.82       620.29  raw materials are based on the unit sales in each product
 Production labor         378.24        114.59       263.65  production labor is based on the unit sales in each product
 Production equipment depreciation           75.30          47.25         28.05  depreciation cost is based on the labor hours and the unit sales in each product
 Production utilities         221.76          67.18       154.57  production utilities are based on the labor hours and unit sales of each product
 Material handling – per unit      4,200.00     1,083.60    3,116.40  The cost based on the unit sales in each product.
 Material handling, storage, shipping – per breakpoint      9,800.00     2,528.40    7,271.60  The breakpoint of each unit based on the unit sales made in each product.
 Supervisor personnel costs      1,141.93        418.74       723.19  supervisor cost in proportion of the unit sales of each product
 Administration           55.00     1,986.60    5,713.40  administration cost apportioned between the two products based on unit sales
 Administrative utilities           39.00     1,408.68    4,051.32  administrative utilities apportioned between the two products based on the unit sales
 Marketing and promotion – Feel so Good           77.00          77.00    the cost is directly allocated
 Marketing and promotion – Dump the Pounds           36.00           36.00  the cost is directly allocated
 Research and Development         301.00   10,872.12  31,267.88  cost is apportioned based on the unit sales
 Administrative depreciation         156.00     5,634.72  16,205.28  cost is apportioned based on the unit sales
       Total full unit costs    17,618.34   24,651.83  69,555.51  total full unit costs in each product

 

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