Assignment #3.

Product design Charts and

BE analysis

Problem #1
Suppose XYZ Ltd is expecting of selling 10,000 units at a price of $10 each. The variable
cost associated with the product is $5 per unit and the fixed cost is estimated at $15,000 per year.
Determine:
1)- The breakeven point if sale price (S) is $10 per unit
2)- Suppose the $15000 fixed cost is the average value and to improve the accuracy of the
calculations, we need to assume that it is normally distributed with mean = $15000 per year with
standard deviation of $800.
a)- Let X= the break-even point above which, 98% if times the Company will realize a profit.
b)- If Y= the break-even point below 95% of time we will have a loss.

Answer:

Company name : XYZ Ltd

Total Units to be Sold : 10,000
Price per Unit = $10
Fixed Cost = $15,000
Variable Cost per Unit = $5
1)
Break Even Point = ?
Break Even point is the point where sales and revenues interact or intercept. In this case, we are going
to find the Break Even Point quantity wise,
So,
Selling Price per unit = $10
Variable Cost per unit = $5
So, Contribution per unit = $10 – $5 = $5
Hence Break-Even Point (Quantity) = $15000 / $5 units
Break-Even Point (Quantity) = 3000 Units

While in terms of Sales,

Here contribution per unit = $5

Selling price per unit = $10
So, contribution margin ratio = $5 / $10 = 0.5
Hence Break Even Sales ($) = $15000 / 0.5.
2)

In the second case, we are assuming that the fixed cost is the average with standard deviation of $800.
So
a)
Break Even point = X = ?
For the company of Break Even Point above which 98% of times company will realize profit.
So by adding $300 to fixed cost $15300, we have
Break Even Point = 15300/5 = 3060 Qty

b)
Y=?
So by deducting $750 from average fixed cost
Break Even Point = 15000 – 750/5 = 2850 Qty.
Problem #2
Motor’s annual Report shows the number of units (vehicles) the company sold in the last
three years, 2017,2018, and 2019. The report also provides information on total revenue and
expenses.  
Year Number of units Total Revenue Total variable Total fixed cost
sold realized ($mil.) cost ($mil.) (in $)1000)
2017 10,008,000 140,205 121,784 10.345
2018 9,600,000 133,449 116229 9570
2019 8,384,000 133,045 120356 9650
Table 1

1)-using information in Table 1, determine the company’s Break-Even Points for each year
2)-Using three years moving average determine sales forecast for the year 2020. Use the
3-year average revenue/unit, variable cost /unit and total fixed cost per year, calculate %
of 2020 sale that will be over the break-even Point and the expected profit the company
may will realize in 2020.

Answer:

Break Even point for Year 2017:

Sales per Unit = 140,205,000,000/10,008,000 = $13,909.22

Variable Cost Per Unit = 121,784/10.08 = $12,081.74
Break Even Point = 10345,000/13909.22 – 12081.74 = 5662 Units

Break Even point for Year 2018:

Sales per Unit = 133,449,000,000/9,600,000 = $13,900.93
Variable Cost Per Unit = 116229/9.6 = $12,107.18
Break Even Point = 9,570,000/13,900.93 – 12,107.18 = 5335 Units

Break Even point for Year 2019:

Sales per Unit = 133,045,000,000/8,384,000 = $15,868.91
Variable Cost Per Unit = 120356/8.384 = $14,355.44
Break Even Point = 9,650,000/15,868.91 – 14,355.44 = 6376 Units

2)

Using three year moving averages:

Forecast = 10.08 + 9.6 + 8.3/3 = 9.32 Million units

Now,

Revenue/ Unit and Moving Average:

Year Revenue/Unit
2017 14009.29257

2018 13900.9375

2019 15868.91698

Moving Average = 14593.04902

Variable Cost / Unit and Moving Average:

Year Variable Cost/Unit

2017 12168.66507

2018 12107.1875

2019 14355.43893

Moving Average = 12877.09717

Total Fixed Cost:

Year Total fixed cost
(in $)1000)
 2017 10.345
2018 9570
2019 9650

Moving Average = 9855

Break Even Point for year 2020 = 9855,000/ 14593.04902 - 12877.09717 = 5743 Units
Profit expected in Year 2020 = Total Revenue – Total Cost ( Fixed + Variable)
= $136,006 million – ( 9.855 million + 120,014 million )
= $15981.67 Million
Problem #3
For the product shown in Figure1, develop a)- a Part list, a Bill of material (BOM) and
An assembly Chart. The assembly method is shown below. This material will be discussed further
in class.

Assembly method: 1) A+B, 2)-(A*B)+C, 3)-(F+G+B)

4)-(F+G+B)+E +H, 5)- (A+B+C)+ [(F+G+B) + E +H)]
Figure 1