Reference no: EM13903319
Cost cutting to break even. Cost-volume-profit analysis showed how much Auto, Inc. had to improve just to break even in Year 1. In that year, the break-even point was 2.2 million units, but the company was selling considerably fewer than 2 million units. Faced with a severe recession in the industry, Auto, Inc. had virtually no chance to increase sales enough to break even. Meanwhile, the company had received loan guarantees from the U.S. gov- ernment, which evoked considerable criticism that the federal government was supporting a ‘‘failing'' company.
By Year 4, Auto, Inc. reduced its break-even point to 1.1 million units, and the company reported a profit for the first time in several years. The turnaround came despite continued low sales in the industry; it resulted primarily from severe cost cutting, which reduced fixed costs in constant dollars from $4.5 billion in Year 1 to $3.1 billion in Year 4. In addition, the company made improvements in its production methods, which enabled it to maintain its volume of output despite the reduction in fixed costs.
a. If Auto, Inc.'s break-even volume was 1.1 million units and its fixed costs were $3.1 billion, what was its average contribution margin per unit?
b. Why do you think management concentrated on reducing fixed costs to put Auto, Inc. above its break-even point?
c. As a shareholder of Auto, Inc., what concerns might you have about the company's massive cost cutting?
|
What is the cost of obtaining financing with sale-leaseback
: How much would the corporation receive from a sale-leaseback of the property? What is the cost of obtaining financing with a sale-leaseback? What is the return from continuing to own the property
|
|
What is present operating profit per month of kids education
: What is the present operating profit per month of the Kids Education Center before Ms. Mooring's salary? What is (are) the break-even point(s), before Ms. Mooring's salary, assuming a student- teacher ratio of 6:1?
|
|
Write report to the dean that evaluates quality of analysis
: Write a report to the dean that evaluates the quality of this analysis. In particular, focus on concerns about the accuracy of the data and the limitations of cost-volume-profit analysis.
|
|
A child pulls a wagon at a constant velocity
: A child pulls a wagon at a constant velocity along a levelsidewalk the child does this by applying a 22 newton force to the wagon handle which is incline at 35 degrees to the sidewalk
|
|
Why do management concentrated on reducing fixed costs
: Why do you think management concentrated on reducing fixed costs to put Auto, Inc. above its break-even point? As a shareholder of Auto, Inc., what concerns might you have about the company's massive cost cutting?
|
|
Directed in the positive x direction
: A charge of -4.6 µC is located at the origin; a charge of 6.13 µC is located at x = 0.2 m, y = 0; a third charge Q is located at x = 0.32 m, y = 0. The force on the 6.13 µC charge is 564.3 N, directed in the positive x direction.
|
|
Find the force exerted by the field on a proton
: A uniform magnetic field of magnitude 1.43 T is in the positive z direction. Find the force exerted by the field on a proton for the following proton velocities.= 4.6 x 106 m/s + 3.3 x 106 m/s
|
|
A rock of mass 150g is thrown vertically
: A rock of mass 150g is thrown vertically up into the air with a speed of 15 m/s. How high will it travel?
|
|
A compressor in a mechanical room
: A compressor in a mechanical room was measured at 5 feet from the source to have a sound pressure level of 90 dB. What would the sound pressure level be at 10 feet from the source?
|