Sunday P&L/unit Sunday P&L
Units per day 4
Sales $ 10,000 $ 40,000
Direct Labor $ 4,000 $ 16,000
Materials
Other Direct $ 3,244 $ 12,976
Charges $ 156 $ 624
$ -
COGS
Contribution $ - $ -
Margin $ - $ -
$ -
Depreciation
Other Mfg. $ 497 $ 1,988
Overheads $ 177 $ 708
Sales (*) &
General $ 2,019 $ 8,076
Admin. (*) $ 807 $ 3,228
$ -
Total Cost $ 10,900 $ 43,600
$ -
Profit per Unit $ (900) $ (3,600)
Return on Sales Negative Negative
Scenario 2
Sales
Direct Labor
Materials
Other Direct Charges
Cost of Goods Sold
Contribution Margin
Depreciation
Other Mfg. Overheads
Sales (*)
General & Admin. (*)
Total Cost
Profit per Unit
Return on Sales
If the manufacturing of standard model compressors on Sundays is d
Contribution Margin -> we should keep producin
Keep manufacturing on Sundays Drop Difference in Profit
$ 40,000 $ - $ (40,000)
$ 16,000 $ - $ 16,000
$ 12,976 $ - $ 12,976
$ 624 $ - $ 624
$ 29,600 $ - $ 29,600
$ 10,400 $ - $ (10,400)
$ 1,988
$ 708
$ 8,076 (*) Because the Sales & General
$ 3,228 Administrative is a period cost that
incurred regardless of the level of
production or sales in a given period, it
$ 43,600 is irrelevant to the management
decision
$ (3,600)
Negative
uring of standard model compressors on Sundays is drop, the company losses 10,400 in
Contribution Margin -> we should keep producing on Sunday
Scenario 1
Keep manufacturing on Sundays Drop
Sales $ 40,000 $ -
Direct Labor $ 16,000 $ -
Materials $ 12,976 $ -
Other Direct Charges $ 624 $ -
Depreciation $ 1,988 $ -
Other Mfg. Overheads $ 708 $ -
Sales $ 8,076 $ -
General & Admin. $ 3,228 $ -
Total Cost $ 43,600 $ -
Profit $ (3,600)
If the manufacturing of standard model compressors on Sundays is drop, the company gains
3,600 in Contribution Margin -> we should keep producing on Sunday
Difference in Profit
$ (40,000)
$ 16,000
$ 12,976
$ 624
$ 1,988
$ 708
$ 8,076
$ 3,228
$ 43,600
$ 3,600
s is drop, the company gains
ducing on Sunday
Q1
Sales
4
Quantity
Weekdays Saturday Sunday
Price $ 10,000
Direct Labor $ 2,000 $ 3,000 $ 4,000
Materials $ 3,244 $ 3,244 $ 3,244
Other Direct Charges $ 156 $ 156 $ 156
Depreciation $ 497 $ 497 $ 497
Other Mfg. Overheads $ 177 $ 177 $ 177
Cost of Goods Sold $ 6,074 $ 7,074 $ 8,074
Sales $ 1,519 $ 1,769 $ 2,019
General & Admin. $ 607 $ 707 $ 807
Total Cost $ 8,200 $ 9,550 $ 10,900
Profit per Unit $ 1,800 $ 450 $ (900)
Return on Sales 18% 5% Negative
Q1
Sales Quan 4
Weekdays Saturday Sunday
Price 10000
Direct Labor 2000 3000 4000
Materials 3244 3244 3244
Other Direct Charges 156 156 156
Depreciation 497 497 497
Other Mfg. Overheads 177 177 177
Cost of Goods Sold 6074 7074 8074
Sales 1519 1769 2019
General & Admin. 607 707 807
Total Cost 8200 9550 10900
Profit per Unit 1800 450 -900
Return on Sales 0.18 0.045 Negative
Keep manufacturing standard model compressors on Sundays.
Keep manufacturing standard model compressors on Sundays
Sales $ 40,000
Direct Labor $ 16,000
Materials $ 12,976
Other Direct Charges $ 624
Cost of Goods Sold $ 29,600
Contribution Margin $ 10,400
Depreciation $ 1,988
Other Mfg. Overheads $ 708
Sales $ 8,076
General & Admin. (*) $ 3,228
Total Cost $ 43,600
Profit per Unit $ (3,600)
Return on Sales Negative
$ 650
Price
5500 Sales Forecast Light Weight Compressor
6000
12
6500
10
7000
8
7500
6
8000
4
2
0
5500 6000 6500 7000 7500 8000
Price ($)
Sunday
Profit per Unit -900
Standard Model Compressor Profit
0
Sunday
-100
-200
-300
Profit -400
-500
-600
-700
-800
-900
-1000
Keep manufacturing standard model compressors o
days. Drop
Drop Difference in CM
$ - $ (40,000)
$ - $ 16,000
$ - $ 12,976
$ - $ 624
$ - $ 29,600
$ - $ (10,400)
(*) Because the General Administrative is a
period cost that incurred regardless of the
level of production or sales in a given period,
it is irrelevant to the management decision
ht Compressor
8000
ompressor Profit
y
Profit per Unit
model compressors on Sundays. Drop Difference in CM
