CVP Sales Price Per Unit 7500, Variable Cost Per Unit 6700, ✓ Solved

CVP Sales Price Per Unit7500variable Cost Per Unit6700fixed Cost

Determine the breakeven point for a product with a selling price of $75.00 per unit, variable cost of $67.00 per unit, and fixed costs of $100,000.00. Use the formula where total costs equal total revenue: 67X + 100,000 = 75X, and solve for X to find the number of units needed to break even.

The total variable cost per unit is $67, and fixed costs are $100,000. To find the breakeven volume, set up the equation: 67X + 100,000 = 75X. Simplify to find X: 100,000 = (75 - 67)X, which results in X = 12,500 units. Therefore, the company needs to sell 12,500 units to break even, covering all fixed and variable costs.

using CVP analysis to determine breakeven point

Contribution margin per unit is calculated as selling price minus variable costs: $75 - $67 = $8 per unit. The breakeven volume in units is total fixed costs divided by contribution margin per unit: $100,000 / $8 = 12,500 units. This means the company must sell 12,500 units to achieve the break-even point where total revenues equal total costs.

Introduction of the Chosen Public Company: Johnson & Johnson

Full Legal Name and Stock Symbol

The full legal name of the company chosen for this project is Johnson & Johnson, traded publicly under the stock symbol JNJ.

Reason for Selection and Personal Interest

I selected Johnson & Johnson because I personally use their products daily, especially for my daughter’s hygiene, and I am interested in understanding their operations more deeply amidst ongoing lawsuits and recent financial challenges. This personal connection motivates my curiosity about their business strategies and product development.

Investment Concept and Proposal

The investment idea involves helping Johnson & Johnson develop a new, eco-friendly product line that appeals to modern consumers seeking sustainable and trustworthy products. The company needs to innovate and rebuild consumer trust through environmentally conscious products, which could boost sales and improve brand reputation.

Course Project Overview and Presentation Guidelines

The project entails creating a comprehensive 15–20-slide PowerPoint presentation directed at the President and CEO of Johnson & Johnson, advocating for the proposed investment. The presentation should articulate key points concisely, supported by detailed speaker notes elaborating on the data and analysis presented.

The presentation should include the following components:

  • Cover slide with company details, project title, date, and presenter.
  • Background overview of the company's business to contextualize the investment.
  • Clear presentation of the investment idea and its justification.
  • Historic financial data analysis covering revenues, costs, expenses, and cash flows, demonstrating potential returns and viability using capital budgeting tools.
  • Break-even analysis.
  • Summary of final recommendations emphasizing why the company should proceed with this project.
  • Speaker notes providing detailed explanations to simulate a verbal presentation.

Project Phases and Evaluation Criteria

The project is structured in phases, starting with selecting and approving a public company, conducting detailed financial analysis using Excel, and culminating in a well-structured PowerPoint presentation. Key evaluation metrics include completeness, accuracy, clarity, and persuasiveness of the financial analysis, presentation design, and written justification.

Pricing and Cost Analysis: Summary

Based on the previously established figures, the company's cost-volume-profit (CVP) analysis indicates that selling 12,500 units is necessary to break even. This calculation is fundamental in assessing project viability, particularly when proposing new product lines or operational changes to the company’s leadership.

Conclusion: Strategic Recommendations

The data-driven insights derived from the CVP analysis and financial projections serve as a robust foundation for advising Johnson & Johnson on establishing a new eco-friendly product line. The understanding of break-even points, contribution margins, and potential profitability supports a compelling case for strategic investment, aligning with market trends toward sustainability and consumer trust.

References

  • Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2021). Managerial Accounting. McGraw-Hill Education.
  • Hilton, R. W., & Platt, D. (2019). Managerial Accounting: Creating Value in a Dynamic Business Environment. McGraw-Hill Education.
  • Drury, C. (2020). Management and Cost Accounting. Cengage Learning.
  • Ross, S. A., Westerfield, R. W., & Jaffe, J. (2020). Corporate Finance. McGraw-Hill Education.
  • Damodaran, A. (2022). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. Wiley.
  • Brigham, E. F., & Ehrhardt, M. C. (2019). Financial Management: Theory & Practice. Cengage Learning.
  • Shapiro, A. C. (2021). Multinational Financial Management. Wiley.
  • Benninga, S. (2019). Financial Modeling. MIT Press.
  • Penman, S. H. (2019). Financial Statement Analysis and Security Valuation. McGraw-Hill Education.
  • Richardson, V. J., & Kaar, K. (2020). Business Finance and Capital Budgeting. Routledge.

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