MGM301 CASE 2

MGM301 CASE 2 - =$658,000-$309,000=$349,000 4. (a) Reduce...

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MGM301 A9 CASE 2. Washburn International: Guitars and Break-Even 1. (a) Price of the guitar and easy use. (b) Variety features and high performance of the guitar. 2. (a) Involves endorsements by internationally known musicians who play its instruments and lend their names to lines of Washburn signature guitars. (b) Decided to move to Nashville, Tennessee. It will be the result of the lower price. Because there are many skilled workers in the region, and its fixed costs will be reduced by avoiding some of the expenses of having a big city location. 3. (a) Break Even Point= Fixed cost/(Unit price-Unit variable cost) =Fixed cost/(Unit Price-(DM VC+DL VC)) =($12,000+$4,000+$20,000)/($329-$25-(8*$14)) =$35,000/$192 =182.29 =182 Guitars (b) Break Even Point=$35,000/$222 =157.66 =158 Guitars (c) Break Even Point=$35,000/$162 =216.05 =216 Guitars (d) Profit = Total revenue - Total cost =(2,000 units*$329)-($35,000+2000 units*$137)
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Unformatted text preview: =$658,000-$309,000=$349,000 4. (a) Reduce the rent and taxes expense by 40%. =$12,000-($12,000*40%)=$7,200 Reduce the wage rate it pays by 15%. =$112-($112*15%)=$95.2 Break Even Point=$7,200+$4,000+$20,000/($329-$25-$95.2) =$31,200/$208.8=149.42=149 Guitars (b) Profit = Total revenue Total cost = (2,000 units*$329)-($31,200+2,000 units*$120.2) =$658,000-$240,400=$417,600 5. (a) Due to economy condition and inexpensive labor resources of Asia, Rent expense, DM, and DL costs might be lowered. (b) Some Asia governments regulation may give high tax rate to foreign firms. Additional tax expense might able to incurred. Even though, there are plenty of human resources in Asia, they might not be unskilled. Therefore, Washburn will need additional management and quality control program expense....
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MGM301 CASE 2 - =$658,000-$309,000=$349,000 4. (a) Reduce...

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