Problem I: Nebraska Concrete
Nebraska Concrete has secured a contract to build a frontage road for the Wayne, Nebraska. Dave is the Project Manager for Nebraska Concrete and has estimated that the cost of the project is $50,000. Nebraska Concrete's policy dictates that he adds 18% onto the cost estimate. The company also estimates it can complete the project within two months. In the first month, the company incurred $20,000 in costs and completed 40% of the project. In the second month, the company incurred another $20,000 in costs and completed the remaining 60% of the project. The total cost incurred was $40,000.
i. Provide a sentence that might describes Nebraska Concrete's effectiveness regarding the project.
ii. Provide a sentence that might describe Nebraska Concrete's efficiency regarding the above project.
iii. What are the gross sales for the project?
iv. What are the actual expenses for the project?
v. What was the net income for the project?
Problem II: Wayne Corrugated, Inc.
Wayne Corrugated, Inc., manufactures folding paperboard boxes from purchased paperboard. They sell these paperboard boxes to meat processing facilities across the Midwest.
Wayne Corrugated, Inc., has fixed costs per year of $200,000. They manufacture just one product with a selling price per unit of $5.00 and a variable cost per unit of $1.00.
Answer the following questions (you MUST show your work to earn credit).
i. What is the breakeven point in units?
ii. What is the breakeven point in sales dollars?
iii. If the firm sold 55,000 units last year, what was the margin of safety in units?
iv. If the firm sold 55,000 units last year, what profit did it generate?
v. If the firm had only sold 45,000 units last year, what amount of loss would have been generated?
vi. Use the original problem except assume fixed costs decreased by $25,000. What would the new breakeven point in units be?
vii. Use the original problem except assume unit variable costs decrease by $0.75. What would the new breakeven point in units be?
viii. Use the original problem except assume the selling price decreased by $2. What would the contribution ratio be?
ix. Use the original problem information. How many units would the firm have to sell to generate the target profit of $30,000?