Mendel Paper Company Complete: Case 2B (Mendel Paper Company) In this case, you are provided information regarding selling prices and costs of several products offered by Mendel Paper Company. In...

Running Head: Case Analysis (Mendel Paper Company)
Case Analysis (Mendel Paper Company)
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March 27th, 2019
    Estimated Contribution Margins
     
     
     
     
     
     
    Computer Pape
    Napkins
    Place Mats
    Poster Board
    Estimated sales volume (Per Unit)
    30,000.00
    120,000.00
    45,000.00
    80,000.00
    Selling Prices
    14.00
    7.00
    12.00
    8.50
    Material Costs
    6.00
    4.50
    3.60
    2.50
    Revenues
    420000.00
    840000.00
    540000.00
    680000.00
    Units Per hou
    6.00
    10.00
    5.00
    4.00
    Variable overhead (Per Unit)
    1.50
    0.60
    2.40
    2.00
    Variable Expenses
    $45,000.00
    $72,000.00
    $108,000.00
    $60,000.00
    Contribution Margin
    $240,000.00
    $300,000.00
    $378,000.00
    $480,000.00
    Contribution Margin (Per Unit)
    $8.00
    $2.50
    $8.40
    $6.00
The CM (Contribution Margin) is the difference of sales revenue and the variable costs. Moreover, the CM helps the management in determine the profit margin for the project and also take care for the sales revenues.
     
    Sales proportions
    Contribution Margin Product
    Weighed Contribution Margin
    Computer Pape
    11%
    $8
    $0.88
    Napkins
    44%
    $2.50
    $1.10
    Place Mats
    16%
    $8.40
    $1.34
    Poster Board
    29%
    $6
    $1.74
    Total
    100%
     
    $5.06
BEP for sales mix and MOS for sales Volume:
Weighted Contribution Margin = Sales proportions*Contribution Margin Product
Total Fixed Costs = $420,000 + $118000
Total Fixed Costs = $538,000
Total Units =$538,000/$5.06
Total Units (Break Even) =106,324
    Product Line
    Sales Mix Proportion
     
    Total Units
    Units sold
     
    Margin
    CM
    Computer Pape
    11.00%
    x
    275,000
    30,000
    x
    8.00
    $240,000.00
    Napkins
    44.00%
    x
    275,000
    120,000
    x
    2.50
    $300,000.00
    Place Mats
    16.00%
    x
    275,000
    45,000
    x
    8.40
    $378,000.00
    Poster Board
    29.00%
    x
    275,000
    80,000
    x
    6.00
    $480,000.00
    Break even CM
    100.00%
     
     
    280,000
     
     
    $1,398,000.00
Margin of Safety = $2,480,000 - $1,398,000
Margin of Safety = $1,082,000
    CM with revisions
     
    Computer Pape
    Napkins
    Place Mats
    Poster Board
    Estimated sales volume per unit
    35000
    120000
    45000
    80000
    Selling Prices
    $14.00
    $7.00
    $12.00
    $8.50
    Material Costs
    $7.00
    $4.50
    $4.00
    $2.50
    Revenues
    $490,000.00
    $840,000.00
    $540,000.00
    $680,000.00
    Units Per hou
    6.00
    10.00
    5.00
    4.00
    Variable overhead per unit
    $1.50
    $0.60
    $2.40
    $2.00
    Variable Expenses
    $45,000.00
    $72,000.00
    $108,000.00
    $60,000.00
    CM
    $245,000.00
    $300,000.00
    $360,000.00
    $480,000.00
    CM per unit
    $7.00
    $2.50
    $8.00
    $6.00
     
    Sales proportions
    Contribution Margin Product
    Weighed Contribution Margin
    Computer Paper
    $0.13
    $7.00
    $0.91
    Napkins
    $0.43
    $2.50
    $1.07
    Place Mats
    $0.16
    $8.00
    $1.28
    Poster Board
    $0.28
    $6.00
    $1.68
    Total
    $1.00
     
    $4.94
Weighted Contribution Margin = Sales proportions*Contribution Margin Product
BEP for sales mix and MOS for sales Volume
Total Fixed cost = $378,000
Total Units = 378,000/$4.94
Total Units = $76,518.22
    Product Line
    Sales Mix Proportion
    
    Total Units
    Units sold
    
    Margin
    Contribution Margin
    Computer Pape
    13%
    x
    280,000
    35,000
    x
    $7.00
    $245,000.00
    Napkins
    43%
    x
    280,000
    120,000
    x
    $2.50
    $300,000.00
    Place Mats
    16%
    x
    280,000
    45,000
    x
    $8.00
    $360,000.00
    Poster Board
    28%
    x
    280,000
    80,000
    x
    $6.00
    $480,000.00
    Break even CM
    100%
     
     
    280,000
     
     
    $1,385,000.00
MOS = $2,550,000-$1,385,000
MOS = $1,165,000
He
ert’s Concerns of Variable Rate
The He
ert is majorly concerned about the variable cost of the place mats does ask some of the question related to continuation of product line. However, the variable cost is higher so the place mats able to manufacture 27 percent of CM will only being 16 percent of the overall sales mix. The excess of the sales revenue over the variable cost is considered as the CM. With the help of CVP equation we see that the CM contribute majorly in cover fixed costs also helps in generating net income. For the company it is appropriate to continue the product. For lowering the overall costing of the company may want to look the labor and equipment to see if any improvement can help is increasing the overall manufacturing with the help of decreasing variable cost.
References:
Taschner, A., & Charifzadeh, M. (2016). Management and Cost Accounting. Wiley.
Wa
en, C., Reeve, J. M., & Duchac, J. (2014). Managerial Accounting. Cengage Learning
Wild, J. J., Chiappetta, B., & Shaw, K. W. (2009). Financial and Managerial Accounting: Information for Decisions, Volume 1. McGraw-Hill Irwin.
Zimmerman, J. (2017). Accounting for Decision Making and Control. McGraw hill.
Horngren, C. T., & Sundem, G. L. (1978). Introduction to Management Accounting. Pearson.
Taschner, A., & Charifzadeh, M. (2016). Management and Cost Accounting. Wiley.