On December 15, 20X2, you began as the new CFO of Trilogy Inc. Trilogy produces and...

Transcribed Image Text:

On December 15, 20X2, you began as the new CFO of Trilogy Inc. Trilogy produces and manufactures stainless steel water bottles. You inherited the business (along with all of its problems) from your father. Although your father is still alive and well, he has clearly stated he no longer wants anything to do with the business. It is now February 15, 20X3, and you have just finished preparing the 20X2 annual reports. During the process, you noticed many things that were unorganized and did not make sense. Also, you were very disappointed to learn that the company finished the year in a deficit. You believe Trilogy is a good company; however, there are many improvements that could be made to increase efficiency and boost profit. You just have to find them. As a starting point, you called a meeting with the junior accountant. You asked him to provide you with a break-even analysis for Trilogy. The junior accountant stated that an analysis of this nature had never been performed and, although he could remember learning about a break-even analysis in university, he wasn't sure how to carry out this task. You realized that you should probably just do this on your own, as the junior accountant wasn't going to be much help. The junior accountant provided you with a list of revenues and expenses (Exhibit 1). He stated that most of the expenses are straightforward as to whether they are a fixed or a variable cost with the exception of the "other costs." After some discussion, you learn that the "other costs" are made up of depreciation, which is calculated using the straight-line method, and maintenance, which varies directly with the level of sales. You quickly jot down a "to-do list" of the tasks you would like to complete by the end of the week: 1. Calculate the break-even point. 2. Use the break-even analysis to identify areas that could be improved to increase overall profitability. Determine total fixed cost amount. Determine the total variable costs amount and convert this to variable cost per unit. Determine the CM per unit (hint CM per unit = price-VC per unit). Calculate the break-even in number of units sold. Comment (three brief bullet points) on goals and/or improvements for this business. Be as specific as you can in each bullet point (maximum 10 words per bullet point). Exhibit 1 Trilogy Financial Data, year-end 2022 $ Sales Revenue Direct Materials Steel Plastic Other DM DL Wages Admin Salaries Rent Insurance Other Costs (40% fixed) Net Income/(Loss) Break-Even in units sold Total Fixed Costs / CM per unit 4,000,000 1,300,000 290,000 370,000 1,500,000 210,000 125,000 90,000 200,000 (85,000) 500,000 bottles sold, $8.00 price On December 15, 20X2, you began as the new CFO of Trilogy Inc. Trilogy produces and manufactures stainless steel water bottles. You inherited the business (along with all of its problems) from your father. Although your father is still alive and well, he has clearly stated he no longer wants anything to do with the business. It is now February 15, 20X3, and you have just finished preparing the 20X2 annual reports. During the process, you noticed many things that were unorganized and did not make sense. Also, you were very disappointed to learn that the company finished the year in a deficit. You believe Trilogy is a good company; however, there are many improvements that could be made to increase efficiency and boost profit. You just have to find them. As a starting point, you called a meeting with the junior accountant. You asked him to provide you with a break-even analysis for Trilogy. The junior accountant stated that an analysis of this nature had never been performed and, although he could remember learning about a break-even analysis in university, he wasn't sure how to carry out this task. You realized that you should probably just do this on your own, as the junior accountant wasn't going to be much help. The junior accountant provided you with a list of revenues and expenses (Exhibit 1). He stated that most of the expenses are straightforward as to whether they are a fixed or a variable cost with the exception of the "other costs." After some discussion, you learn that the "other costs" are made up of depreciation, which is calculated using the straight-line method, and maintenance, which varies directly with the level of sales. You quickly jot down a "to-do list" of the tasks you would like to complete by the end of the week: 1. Calculate the break-even point. 2. Use the break-even analysis to identify areas that could be improved to increase overall profitability. Determine total fixed cost amount. Determine the total variable costs amount and convert this to variable cost per unit. Determine the CM per unit (hint CM per unit = price-VC per unit). Calculate the break-even in number of units sold. Comment (three brief bullet points) on goals and/or improvements for this business. Be as specific as you can in each bullet point (maximum 10 words per bullet point). Exhibit 1 Trilogy Financial Data, year-end 2022 $ Sales Revenue Direct Materials Steel Plastic Other DM DL Wages Admin Salaries Rent Insurance Other Costs (40% fixed) Net Income/(Loss) Break-Even in units sold Total Fixed Costs / CM per unit 4,000,000 1,300,000 290,000 370,000 1,500,000 210,000 125,000 90,000 200,000 (85,000) 500,000 bottles sold, $8.00 price

Answer rating: 100% (QA)

To calculate the breakeven point for Trilogy Inc we first need to determine the total fixed costs total variable costs and contribution margin per uni... View the full answer