Bill French Essay

Words: 2572
Pages: 11


Bill French picked up the phone and called his boss, Wes Davidson, controller of DuoProducts Corporation. “Wes, I’m all set for the meeting this afternoon. I’ve put together a set of break-even statements that should really make people sit up and take notice – and I think they’ll be able to understand them, too.” After a brief conversation, French concluded the call and turned to his charts for one last checkout before the meeting. French had been hired six months earlier as a staff accountant. He was directly responsible to Davidson and had been doing routine types of analytical work. French was a business school graduate and was considered by his associates to be quite capable and unusually
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And that may not be all. We may call it 90 percent of

plant capacity, but there are a lot of places where we’re just full up and we can’t pull things up any tighter. John Cooper: Fred is right, but I’m not finished on this bit about volume changes. According to the information that I’ve got here – and it came from your office – I’m not sure that your break-even chart can really be used even if there were to be no changes next year. It looks to me like you’ve got average figures that don’t allow for the fact that we’re dealing with three basic products. Your report on each product line’s costs last year (see Exhibit 3) makes it pretty clear that the “average” is way out of line. How would the breakeven point look if we took this on an individual product basis? Bill French: Well, I’m not sure. It seems to me that there is only one break-even point for the firm. Whether we take it product by product or in total, we’ve got to hit that point. I’ll be glad to check for you if you want, but …

Exhibit 3 Product Class Cost Analysis, Normal Year Aggregate
Sales at full capacity (units) Actual sales volume Unit sales price Total sales revenue Variable cost per unit Total variable cost Fixed costs Profit Ratios: Variable cost to sales Unit contribution to sales Utilization of capacity 2,000,000 1,500,000 $7.20 10,800,000 4.50 6,750,000 2,970,000 1,080,000 0.625 0.375 75%

600,000 $10.00 6,000,000 7.50 4,500,000 960,000 540,000 0.75 0.25 30%