Assignment 2: LASA 1—Cost and Decision-Making Analysis

Cheryl Montoya picked up the phone and called her boss, Wes Chan, Vice President of Marketing at Piedmont Fasteners Corporation.Cheryl: “Wes, I’m not sure how to go about answering the questions that came up at the meeting with the President yesterday.”Wes: “What’s the problem?”Cheryl: “The president wanted to know the break-even point for each of the company’s products, but I am having trouble figuring them out.”Wes: “I’m sure you can handle it, Cheryl. And, by the way, I need your analysis on my desk tomorrow morning at 8:00 sharp in time for the follow-up meeting at 9:00.”Piedmont Fasteners Corporation makes three different clothing fasteners at its manufacturing facility in North Carolina. Data concerning these products appear below: VelcroMetalNylonNormal annual sales volume100,000 units200,000 units400,000 unitsUnit selling price$1.65$1.50$0.85Variable cost per unit$1.25$0.70$0.25Total fixed expenses are $400,000 per year.All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptably large numbers of customers.The company has a very effective lean production system, so there is no beginning or ending work in process or finished-goods inventories.

Using the module readings, the Argosy University online library resources, and the Internet, research break-even point and costing systems. Analyze the case based on your research and what you have learned so far in the course.

Respond to the following:

• Calculate the company’s overall break-even point in total sales dollars.

  Explain your methodology (approximately 2 pages).

• Of the total fixed costs of $400,000: $20,000 could be avoided if the Velcro product were dropped, $80,000 if the Metal product were dropped, and $60,000 if the Nylon product were dropped. The remaining fixed costs of $240,000 consist of common fixed costs such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely (approximately 2 pages):Calculate the break-even point in units for each product. Explain your methodology.Determine the overall profit of the company if the company sells exactly the break-even quantity of each product. Present your results.
• Evaluate costing systems for this company. Explain if this company should be using a job order or process-costing system to accumulate costs (1 page).

Be sure to include your calculations in Microsoft Excel format.

Write a 5–6-page report in Word format. Apply APA standards to citation of sources. Use the following file naming convention: LastnameFirstInitial_M3_A2 .

By Wednesday, January 30, 2013, deliver your report and calculations to the M3: Assignment 2 Dropbox.

This assignment is worth 200 points and will be graded using a rubric. 

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 and read the rubric to understand the expectations.

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20

Assignment 2 Grading Criteria	Maximum Points
Calculate the company’s overall break-even point in total sales dollars.Explain your methodology.
Calculate the break-even point in units for each product in the scenario. Explain your methodology.
Explain if the company sells exactly the break-even quantity of each product, what will be the overall profit of the company and show your results.
Compare and explain if this company should be using a job order or process-costing system to accumulate costs.
Write in a clear, concise, and organized manner; demonstrate ethical scholarship in accurate representation and attribution of sources; and display accurate spelling, grammar, and punctuation.
Total:	200