Hallstead Jewelers Case Study
Hallstead Jewelers Case Study
Class: Managerial Accounting
Instructor: Robert O’Haver
1. The break even point in units and sales have increased form 2003 to 2004 to 2006 due to the greater increase in fixed costs especially from expanding the business as well as insufficient average sales and unit sales to compensate these changes. The margin of safety has decreased over the years due to the increase in expenses and the lack of gross profit to compensate.
Calculations:
| | 2003 | 2004 |2006 |
|Break-even point in number of sales |$3,197 / $.707 = |$3,260 / $.654 = |$4,889 / $.649 = |
|tickets |4522 sales tickets |4985 sales tickets |7533 sales tickets |
|Break-even point in sales dollars |$3,197 / .439 = |$3,260 / .428 = |$4,889 / .418 = |
| |$7282.460 thousand |$7616.822 thousand |$11696.172 thousand |
|Margin of Safety |($8,583 - $7282.460) / $8,583 = |($8,102 - $7616.822) / $8,102 = |($10,711 - $11696.172) |
| |15% |6% |/ $10,711 = |
| | | |-9% |
|Contribution Margin Format |Sales $8,583 |Sales $8,102 |Sales $10,711 |
|(in thousands of dollars) |-VC $4,808
Class: Managerial Accounting
Instructor: Robert O’Haver
1. The break even point in units and sales have increased form 2003 to 2004 to 2006 due to the greater increase in fixed costs especially from expanding the business as well as insufficient average sales and unit sales to compensate these changes. The margin of safety has decreased over the years due to the increase in expenses and the lack of gross profit to compensate.
Calculations:
| | 2003 | 2004 |2006 |
|Break-even point in number of sales |$3,197 / $.707 = |$3,260 / $.654 = |$4,889 / $.649 = |
|tickets |4522 sales tickets |4985 sales tickets |7533 sales tickets |
|Break-even point in sales dollars |$3,197 / .439 = |$3,260 / .428 = |$4,889 / .418 = |
| |$7282.460 thousand |$7616.822 thousand |$11696.172 thousand |
|Margin of Safety |($8,583 - $7282.460) / $8,583 = |($8,102 - $7616.822) / $8,102 = |($10,711 - $11696.172) |
| |15% |6% |/ $10,711 = |
| | | |-9% |
|Contribution Margin Format |Sales $8,583 |Sales $8,102 |Sales $10,711 |
|(in thousands of dollars) |-VC $4,808