BW Manufacturing Company Case Solution

Case Solution

Just a little manufacturer of gas propane gas grills is making final changes towards the 2009 operating budget and considering several modifications in prices, advertising, and product availability. This short case addresses the topic of contribution analysis as a great way to evaluate profit planning issues for instance adding or losing services or products changing an expense adding or lowering expected volumes or planning an earnings budget. In this case you'll find three products, each with assorted proportions of variable and glued costs. The item while using finest profit/unit around the full cost basis gets the least expensive contribution/unit around the variable cost basis, and the other way round. Four different marketing plans are recommended before the very first is finally adopted since the arrange for the whole year. At year finish, the specific results might be compared for the budget also to a flex or modified budget using the actual product volumes recognized. The amounts are pretty easy as well as the students can readily see the benefit of variable costing.

Excel Calculations

Scenerio 1- No change

Scenario 2- Production of Grill A dropped

Scenario 3- Price of Grill C reduced

Scenario 4-Shift of advertising focus

Scenario 5- Lower Price of Grill C and Shift in Advertising Focus

Comparison of Budgeted and Actual Income

Breakeven Analysis

Questions Covered

Should BW drop Grill A? The owners wanted to know the impact of dropping Grill A from their line of products. Richardson was told to assume that the volumes and selling prices of the other two products would be the same whether or not the Grill A product line was dropped.

Should BW lower the price of Grill C? The owners wanted to know the impact if they lowered the price of Grill C to $75 and if doing so led to a 20,000-unit increase in sales of Grill C.

Should BW change its advertising focus? The owners wanted to know the impact of a 10,000-unit increase in Grill C volume and a related 10,000 unit decrease in Grill A volume because of a shift in advertising emphasis.

Should BW lower the price of Grill C and change its advertising focus? The owners wanted to know the impact of lowering the price of Grill C to $75 and shifting the advertising focus more to Grill C, thereby decreasing Grill A volume by 10,000 units and increasing Grill C volume by 30,000 units