Waltham Case

Waltham

According to its own budget, the company had net income $91,200; however, the result of the performance report showed the division lost $7,200 in May. There is a problem which is the company lost the contract in April but there is no adjustment had been made to the budget.

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Break even of WMD

By using budget data, we can get the number of motors which Waltham Motor Division would have to sell to break even.

The formula of Break-even quantity is

Total Fixed Costs / Contribution Margin per Unit

Total Fixed Costs / (Selling Price - Average Variable Costs per Unit)

In addition, the following formula is also to compute contribute margin and get income.

Revenue

－ Variable Costs

Contribution Margin

－ Fixed Costs

Net Income

Revenue = Selling Price x Quantity

$864,000 = Price x $18,000 Price = $48

Average Variable Costs per Unit is 512800/18000=28.49

Break-even quantity = 260000/48-28.49 = 13326.5

Therefore, according to data budget, Waltham Motors Division would have to sell more than 13,326 units in order to break even or cover all the costs which it spent.

The total expected and total actual costs per unit

If all manufacturing and shipping overhead (both variable and fixed) was allocated to planned production, the total expected cost per unit would be:

(Variable Costs + Fixed Cost) / total units = 42.93 / per unit

However, the actual per unit cost of production and shipping would be: 49.51 / per unit