Contribution Margin and Break Even Analysis
Contribution Margin and Break Even Analysis. Many factors come into play in determining business success. One of them is the financial factor. For a company to set financial goals it is crucial that its management know in detail the products or services they sale or provide. This is the analysis of two different scenarios at Aunt Connie 's Cookies Simulation (University of Phoenix, 2011) and the financial performance of Jamestown Electric Supply Company (Heiter, et. al. 2008). During both analysis I applied concepts like fixed and variable costs, contribution margin, break-even point, indifference point, and operating leverage.
Aunt Connie 's Cookies Scenario Simulation The Aunt Connie 's brand grew successfully producing Lemon Crème and Mint cookies. Maria Villanueva is the current chief executive officer of this family-owned company (University of Phoenix, 2011). She faces critical decisions to make because both the lemon crème and mint cookies prices increased and sales volume decreased. Maria should apply several accounting concepts to reach her goal of increasing sales and revenue for the company. Some opportunities and challenges lined up for Aunt Connie 's Cookies like large bulk orders and the buyout of a competitor 's factory (University of Phoenix, 2011). A confectioner commissioned Aunt Connie 's Cookies to fill a bulk order of one million packages of the Real Mint cookies delivered in one month 's time. The stipulations of the order weights greatly on the company as the confectioner will only pay $1.20 per package, which is much cheaper than the mass market selling at $1.50 per packet. Rejecting the order may seem foolish as Aunt Connie 's Cookies has the capacity to produce the order, and could be missing out on a good opportunity if she declines to fill the order (University of Phoenix, 2011). In deciding which cookie 's production to reduce, Maria took into account the concepts of contribution margin, unit
Aunt Connie 's Cookies Scenario Simulation The Aunt Connie 's brand grew successfully producing Lemon Crème and Mint cookies. Maria Villanueva is the current chief executive officer of this family-owned company (University of Phoenix, 2011). She faces critical decisions to make because both the lemon crème and mint cookies prices increased and sales volume decreased. Maria should apply several accounting concepts to reach her goal of increasing sales and revenue for the company. Some opportunities and challenges lined up for Aunt Connie 's Cookies like large bulk orders and the buyout of a competitor 's factory (University of Phoenix, 2011). A confectioner commissioned Aunt Connie 's Cookies to fill a bulk order of one million packages of the Real Mint cookies delivered in one month 's time. The stipulations of the order weights greatly on the company as the confectioner will only pay $1.20 per package, which is much cheaper than the mass market selling at $1.50 per packet. Rejecting the order may seem foolish as Aunt Connie 's Cookies has the capacity to produce the order, and could be missing out on a good opportunity if she declines to fill the order (University of Phoenix, 2011). In deciding which cookie 's production to reduce, Maria took into account the concepts of contribution margin, unit
References: Heiter, L.E. and Heitger, D.L. (2008, May). Jamestown Electric Supply Company: Assessing Customer Profitabililty. Issues in Accounting Education, 23(2), pp. 261-280. University of Phoenix (2011). Simulation: Contribution margin and break-even analysis. Retrieved on January 30, 2011 from: https://ecampus.phoenix.edu/secure/aapd/vendors/tata/sims/accounting/accounting_simul ation3.html