Sam’s Pizza Budget Break-Even and Profits

Week Three Problems

1) Sam’s Pizza is a restaurant business in Cincinnati. His income statement for 2006 shows the following:
Net Sales $ 70,000
Cost of Goods Sold $ 34,000
Selling, general and admin expenses $ 20,000
Operating Income $ 16,000
Assume that Sam’s Pizza had a 10% increase in sales in 2007 and that there was no change in costs except for increases associated with the higher volume of sales. Compute the predicted 2007 operating income and its percentage increase. Explain why the percentage increase in income differs from the percentage increase in sales.
2) Henrietta’s Transistors changed its production operations from one requiring a large labor force to an automated facility dominated by computer controlled robots. This has improved the quality, reliability and flexibility of production schedules and allowed Henrietta to better match the competition. As a result of the change, variable costs fell and fixed costs increased as shown in the following assumed budgets:
Old Production Operation New Production Operation
Variable Unit Cost
Material $0.75 $0.75
Labor $1.90 $0.85
Total Variable per unit $ 2.65 $1.60
Monthly Fixed Expense
Rent and depreciation $500,000 $900,000
Supervisory Labor $ 70,000 $195,000
Other $ 50,000 $100,000
Total Fixed per Month $620,000 $1,195,000
Expected volume is 700,000 per month with each unit selling for $4. Capacity is one million per month.
a. Compute the budgeted monthly profit at the expected volume of 700,000 units under both old and new operations.
b. Compute the budgeted break-even volume under both old and new operations.
c. Compute the budgeted monthly profit if volume falls to 500,000 units under both old and new operations. Discuss the result.
d. Compute the budgeted monthly profit if volume rises to 900,000 units under both old and new operations. Discuss the result.
e. Comment on which operation presents the most financial risk to the company.

3) Create an Excel spreadsheet to perform CVP analysis an show the relationship between price, costs and break-even points in terms of units and dollars. Use the results to answer questions about your findings. Instructions for creating the spreadsheet for the 2003 version of Excel can be found with problem 2-65 in the text. Using those instructions are optional, but the goal is still to create a presentable spreadsheet that shows the selling price, variable cost, contribution margin, contribution margin ratio, fixed costs, breakeven in units and breakeven in dollars for all three proposals.
Scenario: Dunstan Plastics is investigating three proposals for tool packaging for Craftsman Drills. Under all proposals, the fixed costs would be $200,000. Under proposal A, the selling price would be $10 and the variable unit cost would be $6. Under proposal B, the selling price would be $14 and the variable unit cost would be still be $6. Under proposal C, the selling price would be $10 and the variable cost would be $5.56.
When you have completed your spreadsheet, answer the following questions:
a. What are the break-even points in units and dollars under Proposal A?
b. How did the increased selling price under proposal B impact the break-even points in units and dollars compared to the break-even points calculated under proposal A?
c. Why did the change in variable cost under proposal C not impact the break-even not impact the break-even points in units and dollars as significantly as proposal B did?
4) David and Henry’s Ice Cream is produced in a number of flavors. All flavors are produced in the same production line, but the line must be reset between each flavor run to change the ingredient feeds. At the same time, there is ongoing maintenance of the production line to prevent and correct problems during production runs. Unfortunately, David and Henry’s cost accounting has not been able to capture the costs for these two different activities. There is discussion of increasing the variety of flavors produced, so the CFO wants to know how this might impact the maintenance costs of the production line. The CFO has collected the data on the numbers of grosses of gallons of ice cream produced each month as well as the number of times that the production line is reset each month. The data is listed below along with the scatter diagrams of the data for each potential cost driver, grosses of gallons and setups. In one month, April, the plant was closed unexpectedly for much of the month.
a. Find the monthly fixed maintenance cost and the variable maintenance cost per driver item using the visual fit method. Explain how you treated the April data.
b. Find the monthly fixed maintenance cost and the variable maintenance cost using the high-low method on each potential cost driver.
c. Which cost driver (gallons or setups) best predicts the maintenance costs for the CFO?
Units Costs Setups
2400 30000 22
2800 30000 32
3600 4000 4
4000 34000 32
4400 48000 42
5000 46000 48
5400 28000 26
6200 29000 26
6400 52000 54
7000 36000 40
7200 44000 42
7800 43000 38

Calculate the price
Make an order in advance and get the best price
Pages (550 words)
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with AssignmentHelpWeb
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Business Studies
Job well done. Finish paper faster than expected. Thank you!
Customer 452451, October 3rd, 2022
Job well done and completed in a timely fashioned!
Customer 452451, November 18th, 2022
Business Studies
Thank you!
Customer 452451, November 27th, 2022
Thanks a lot the paper was excellent
Customer 452453, October 26th, 2022
Architecture, Building and Planning
The assignment was well written and the paper was delivered on time. I really enjoyed your services.
Customer 452441, September 23rd, 2022
excellent loved the services
Customer 452443, September 23rd, 2022
English 101
Very good job. I actually got an A
Customer 452443, September 25th, 2022
The paper was EXCELLENT. Thank you
Customer 452449, September 23rd, 2022
Excellent services will definitely come back
Customer 452441, September 23rd, 2022
Customer reviews in total
Current satisfaction rate
3 pages
Average paper length
Customers referred by a friend
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat