This 8 page paper answers 4 questions set by the student. The first questions looks at a cookie factory where there is the chance to accept an order for a large number of cookies at a lower than usual price. The paper uses the approach of break even analysis in order to assess if the order should be accepted and when it should be rejected. The second question considers how the cookie factory should decide on what levels of the cookies to produce. The third question considers three learning points from looking at contributions, fixed and variable costs and break even analysis. The last question uses an article looking at Dell’s performance and applies the learning points identified in question three. The bibliography cites 4 sources.
Name of Research Paper File: TS14_TEbreakcase2.rtf
Unformatted Sample Text from the Research Paper:
is that increasing production will mean cutting back on the level of supply that can be made for the usual full price cookies. We are given the price that the
new order is offering and the price the company are currently getting for the cookies. On further questioning we have been given a variable cost, but as this is above
the level of the price being offered by the potential new order then there would need to be an immediate refusal. If the variable costs are above 1.20 a packet,
and the price offered is only 1.20 a packet then there is no need for a break even analysis as there is no contribution to consider. Therefore it is unlikely
that there would be a variable cost of above 1.50 for the real mint, which the student has given as 1.643, meaning that the company would already be in a
loss making position. If we assume that these figures are wrong we can look at this in a more general approach we can look at the income that is
lost and the income that is gained. WE may loose the income from the lost sales, but this will also, in part, be made up with the sales that replace
the lost sales. Lemon cr?me Real Mint Price 2.00 1.50 Packs lost 1,000 2,000 Revenue lost 2,000.00 3,000.00 Net price difference 0.80 0.30 Net Revenue lost 800.00
600.00 This shows us that there is a loss of the packets that are sold of 5,000, but that the revenue for the replacement packets will result in a
net loss, on this level of production only of 1,400. This shows us the level of contribution, assuming tat this is all contribution, that the remaining packets need to