hilton manufacturing co
1)
Profit
Compensation Insurance
Direct Labor
Power
Materials
Supplies
Repairs
158
Product 103
Total Standard
88
1341
59
946
68
20
Other Income
Actual Sales
67.05
10 Remove? - Yes OK to remove
5202
Effect on 2004 Margin if
Product 103 dropped
-2532 A drastic net loss
-2543
2)
They should lower the price due to the increase in Contribution Margin shown below:
Year 2005
Price
Unit Sales
Total Sales
Compensation Insurance
Direct Labor
Power
Materials
Supplies
Repairs
Total Variable Costs
Contribution Margin
CM per Unit
Product 101
$
$
$
$
$
$
$
$
$
$
9.41
750
7,058
148
2,321
40
1,372
94
32
4,007
3,051
4.07
$
$
$
$
$
$
$
$
$
$
8.64
1000
8,640
148
2,321
40
1,372
99
32
4,012
4,628
4.63
Compensation Insurance
Direct Labor
Power
Materials
Supplies
Repairs
3)
Product 103 is the most profitable product with the highest Contribution Margin per unit.
Year 2004
Unit Sales
Total Sales
Compensation Insurance
Direct Labor
Power
Materials
Product 101
2132
$
19,847
$
317
$
4,964
$
86
$
2,935
Product 102
1030
$
9,977
$
167
$
2,341
$
96
$
1,809
Product 103
987
$
10,243
$
172
$
2,640
$
116
$
1,862
Supplies
Repairs
Total Variable Costs
Contribution Margin
CM per Unit
Year 2005
Unit Sales
Total Sales
Compensation Insurance
Direct Labor
Power
Materials
Supplies
Repairs
Total Variable Costs
Contribution Margin
CM per Unit
4) When looking at the variance (the Standard should have been a net loss of 244) it seems as though overall there was less cost than anticipated. Or in other words a favorable
Variance. This favorable variance was found mostly in depreciation as well as production costs (a good chunk of which were fixed costs). $
$
$
$
$
201
68
8,571
11,276
5.29
Product 101
$
$
$
$
$
$
$
$
$
$
996
9,279
116
2,321
40
1,372
94
32
3,975
5,304
5.33
$
$
$
$
$
183
57
4,653
5,324
5.17
Product 102
712
$
6,900
$
81
$
1,619
$
66
$
1,251
$
126
$
40
$
3,183
$
3,717
$
5.22
$
$
$
$
$
135
39
4,964
5,279
5.35
Product 103
501
$
5,202
$
67
$
1,341
$
59
$
946
$
68
$
20
$
Profit
Compensation Insurance
Direct Labor
Power
Materials
Supplies
Repairs
158
Product 103
Total Standard
88
1341
59
946
68
20
Other Income
Actual Sales
67.05
10 Remove? - Yes OK to remove
5202
Effect on 2004 Margin if
Product 103 dropped
-2532 A drastic net loss
-2543
2)
They should lower the price due to the increase in Contribution Margin shown below:
Year 2005
Price
Unit Sales
Total Sales
Compensation Insurance
Direct Labor
Power
Materials
Supplies
Repairs
Total Variable Costs
Contribution Margin
CM per Unit
Product 101
$
$
$
$
$
$
$
$
$
$
9.41
750
7,058
148
2,321
40
1,372
94
32
4,007
3,051
4.07
$
$
$
$
$
$
$
$
$
$
8.64
1000
8,640
148
2,321
40
1,372
99
32
4,012
4,628
4.63
Compensation Insurance
Direct Labor
Power
Materials
Supplies
Repairs
3)
Product 103 is the most profitable product with the highest Contribution Margin per unit.
Year 2004
Unit Sales
Total Sales
Compensation Insurance
Direct Labor
Power
Materials
Product 101
2132
$
19,847
$
317
$
4,964
$
86
$
2,935
Product 102
1030
$
9,977
$
167
$
2,341
$
96
$
1,809
Product 103
987
$
10,243
$
172
$
2,640
$
116
$
1,862
Supplies
Repairs
Total Variable Costs
Contribution Margin
CM per Unit
Year 2005
Unit Sales
Total Sales
Compensation Insurance
Direct Labor
Power
Materials
Supplies
Repairs
Total Variable Costs
Contribution Margin
CM per Unit
4) When looking at the variance (the Standard should have been a net loss of 244) it seems as though overall there was less cost than anticipated. Or in other words a favorable
Variance. This favorable variance was found mostly in depreciation as well as production costs (a good chunk of which were fixed costs). $
$
$
$
$
201
68
8,571
11,276
5.29
Product 101
$
$
$
$
$
$
$
$
$
$
996
9,279
116
2,321
40
1,372
94
32
3,975
5,304
5.33
$
$
$
$
$
183
57
4,653
5,324
5.17
Product 102
712
$
6,900
$
81
$
1,619
$
66
$
1,251
$
126
$
40
$
3,183
$
3,717
$
5.22
$
$
$
$
$
135
39
4,964
5,279
5.35
Product 103
501
$
5,202
$
67
$
1,341
$
59
$
946
$
68
$
20
$