QUESTION: 1
A- Are sweeteners and packaging a variable costs or a fixed cost? What is the impact on the contribution margin of an increase in the per unit cost of sweeteners or packaging? What are the implications for profitability?
The sweeteners and packaging it is direct materials to Coca-Cola production , the varying value in cost behavior depending on the production volume and the level of business activity, therefore it is variable costs( vary in total , fixed in per unit) , when the fixed costs (constant in total , vary in per unit) . according to formulas:
Contribution margin = total revenues –variable costs
When an increase in the per unit cost of sweeteners and packaging (variable cost) the contribution margin decrease assume the total revenue constant and net profit decrease .
Then reached to break – even point.
Break – even point = contribution margin equal total fixed costs, no profit or loss
On the basis of this relationship
Break – even point in units = fixed costs ÷ contribution margin per units
The relationship between the BEP and contribution margin is inversely proportional,
Mean if the contribution margin decrease, the break –even point increase.
(Hoggett, 2012, p: 467- 471).
An example of budget shows the relationship between the contribution margin and profit.
Assume the sales per unit = $1
Variable cost per unit = $0.25
Variable cost per unit after increase = $ 0.40
Old New (after increase per unit cost of sweeteners & packaging )
Sales revenue(100 units) $ 100
25 $ 100
40
Variable costs
Contribution margin 75
40 60
40
Fixed costs
Net income $ 35 $ 20 in the example, reached to conclusion the value of the contribution margin at least ...
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...ch represent the amount of finished product the bottling system sells to retail customers.in this unit's case volume more accurately measures the underlying strength of business system because it measures trends at the retail level and is less impacted by inventory management practices at the wholesale level. (University of Illinois at Chicago, 2000).
The reason Coca-Cola use two different measurements to identify the cause that contributes to the decrease of gross margin and know impairment points in the production or marketing, and how the managers obviate it . On the other hand the company adopted this approach:
- Reduce the budget manufacturing.
- Increase the spread of its branches worldwide through the bottler's license.
- providing a large number of job opportunities around the world, and so contributed to reduce the rates of unemployment for many countries.
Much like the test market Contribution margins were also high for Strike Roach Ender. Aerosol and fogger Strike had a contribution margin exceeding 50% as seen in Table E.
Rocket-Blast, LLC, a beverage maker, has seen its profit margins reduced which presents a real problem for the company going forward (Precord & Macdonald, nd). Management has decided that operating costs must be reduced in order to increase profit margins to
The company’s return on average equity nearly increased as well; in addition, long-term debt was reduced and stock prices soared. Negative Trends 1. Competitive pricing: Following the low operating costs, operating margin in the can industry dropped by 3% between 1986 -1989 due to; • Production capacity for beverage can increased by 7% in 1989 •
[6] Colin Drury, Management and Costing Accounting, (7th edition), Chapter 8, Cost-volume-profit analysis, p. 165-173
There are two solutions that provide the optimal profit given the current constraints under which JP Molasses operates. Under these conditions, the optimal profit is $63,571. This profit margin is achieved in both cases with revenue of $942,354 and cost of $412,333 for material purchased and $466,450 for fixed and variable costs in processing, for total cost of $878,783.
1) Total Variable Costs are 60% of Total Costs; While the other 40% are from fixed costs.
America has evolved over the centuries, from a British colony to an international powerhouse. At one point, the U.S was considered the greatest country in the world. America always found solutions to problems, and tried to help make peace throughout the world, but now that is up to debate. Why? The answer is simple, the government. The dishonesty and bad decisions have resulted in America’s title as a superpower to waver. The government is a growing problem that may lead to the demise of America by negatively affecting political, social, and economic issues in the country.
Do you believe that because Canada is a multicultural society that there is no racism? While the idea of inclusion and buried racism is what one might hope for, the realities of Canada’s national policy when experienced is quiet opposite than the messages expressed though text and other media outlets. Canada is suppose to be a multicultural society which includes all races and cultural backgrounds, everyone is suppose to be included and accepted in our group instead there are instances of discrimination and marginalization to certain racialized groups that have entered Canada the land that is promised to be of freedom and inclusion for all. Multiculturalism is a fundamental characteristic of the Canadian heritage and identity it is what fills our national center. (Harmony 2014). Multiculturalism has been a good policy designed to give people a great impression of our country yet: The Novels Indian Horse (2012) by Richard Wagamese and Obasan (1981) by Joy Kogawa portrays acts of violence, terror, exclusion and hardship. It is observed through reading and analysis that Racism is a never-ending struggle that people of minority backgrounds who immigrate to the land of the free have to endure. Finally, Racism stifles and affects everyone negatively who is an immigrant in the Canadian society; multiculturalism is only a façade which serves to cover up the root of the problem.
To determine if Lille Tissages, S.A. should lower the price to FF15.00/m or not we need to consider the Variable costs and the Contribution margin associated with Item 345.
Signode Industries Inc. - Providing Packaging Solutions Executive Summary SIGNODE INDUSTRY: DILEMMA AT HAND: Mr. Gary Reed, President of Signode Industries packaging division, is in a dilemma as what he should be his course of action to meet the 6.8% increase in price of cold rolled steel- the raw material used in manufacture of Signode’s primary product, steel strapping. There are few options given in the case: Increase Signode’s strapping prices to offset the increased price of cold – rolled steel. Maintain Signode’s current book prices as increasing prices would affect sales force morale. Introduce price-flex model as proposed by Jack Davis i.e. a kind of selective discounting or premium charging for customized services. Recommendations Reason: (All data in accordance to 1983) In accordance to Exhibit 1: Sales of Packaging Division of the company = $285,950 In accordance to Table A: Sales of Apex = 33.3% of $285,950 Sales of BBM = 26.8% of $285,950 Sales of HDM = 33.4% of $285,950 Sales of Customized Products = 6.5% of $285,950 In accordance to Exhibit 4: Similarly, For Apex: As it has a capacity utilization of 71% now, Suppose a sale is $100. Then contribution is $39.15 Therefore variable cost is $60.85. Now if we increase the capacity utilization to 100%, Sales becomes $ 141 since production increases by [(100-71)/71] * 100 = 41% Variable Cost = 141% of 60.85 = $85.8 Fixed Cost = 69.38% * 12.3 = $8.53 Total Cost = 85.8+8.53 = $94.33 EBIT = Sales – Variable cost – Fixed Cost = $46.67 % of EBIT = [(46.67/141) * 100] = 33.09% Suppose the company sales 100x units, the total cost was 69.38. Thus per unit cost was .6938. Now the company sells 141x units, the total cost...
A fraction-of-a-cent cost change can represent a large dollar change in overall profitability, when selling millions of units of product a month. Managers must carefully watch per unit costs on a daily basis through the production process, while at the same time dealing with materials and output in huge quantities” (From Academic
Cosmo-cosmetics Co. uses $0.246 out of every sale dollar to cover variable expenses, leaving $0.753 as a contribution margin to cover fixed costs and make a profit. (Note: 75.3% is the contribution margin as a percentage of sales)
These costs are usually categorized into variable costs and fixed costs. Variable costs are costs that vary depending on production output. Some examples of variable costs that Coca Cola incurs include labor, raw materials, packaging, and transportation and deliver costs. Raw materials are a major variable cost for Coca Cola. When production increases more materials are needed to product more products, therefore the cost for raw materials increases. The main raw material in all Coca Cola products is sugar which includes high fructose corn syrup, sucrose, and sugarcane. The availability of these natural resources often depends on weather conditions, making for fluctuations in market prices. Another example of raw material costs is the cost of materials used to bottle their products. This includes according to Coca Cola’s annual report, PET resin, preforms and bottles, glass and aluminum bottles, aluminum and steel cans, plastic closures, aseptic fiber packaging, labels, cartons; cases, post-mix packaging, and carbon dioxide. (Kent & Waller, 2016). Fixed cost are costs that remain constant regardless of production output. Some examples of fixed cost that Coca Cola incur includes rent expenses for their bottling plants, salary for thousands of employees, the cost to upkeep their plants and equipment, insurance, and advertising expenses. Advertising is a big production cost for Coca Cola that does not change when output
Coca Cola faces many costs when producing their products. These cost are usually categorized into variable costs and fixed costs. Variable costs are costs that vary depending on production output. Some examples of variable costs that Coca Cola incurs include labor, raw materials, packaging, and transportation and deliver cost. Raw materials are a major variable cost for Coca Cola. When production increases more materials are need to product more product therefore the cost for raw materials increases. The main raw material in all Coca Cola products is sugar which includes high fructose corn syrup, sucrose, and sugarcane. The availability of these natural resources often depend on weather conditions making for fluctuations
Depending on the price of raw materials, profits can either go up or down. It is better for the soft drink industry if the raw materials are cheaper because the industry will make more of a profit. This is also a good thing for the consumer because there is not a rise in price.