Harvey Gump
Harvey Gump called his boss, Tom Hannibal, controller of Hazlitt Corporation to tell him that he had prepared a set of attention-grabbing breakeven statements for an informal meeting of Hazlitt managers that afternoon. Following the conversation, Gump reviewed his data one more time before the meeting.Gump had been hired four months earlier as a senior financial analyst reporting directly to Hannibal. Gump was an Ivy League B-School graduate and was reputedly a “hard charger”, quite capable and unusually conscientious. These characteristics caused some friction with associates because Gump recognized his capabilities and continually sought opportunities to “educate” those around him. Hannibal's invitation to Gump for the informal manager's meeting surprised everyone in the accounting group. Apparently, Gump requested permission to make a breakeven presentation. To everyone’s even greater surprise, Hannibal agreed. Hazlitt did not use this type of analysis in its planning procedures. The accounting records provided Gump the following data: Plant capacity 3 million units per year Past year's level of operations 2.25 million units Wtd. Average unit selling price $7.20
2. From the information provided, construct a revised breakeven chart. Harvey Gump: That might be true, but as you can see, all you have to do is read the cost and profit relationship right from the chart for the new volume. Let's see. From this data, Gump calculated the contribution margin as $2.70. With total fixed costs of $4,455,000, he calculated that 1,650,000 units must be sold to break even. He verified this by calculating the dollar sales volume required to break even. Since variable costs per unit were 62.5% of the selling price, Gump reasoned that 37.5% of every sales dollar was available to cover fixed costs. Therefore, fixed costs of $4,455,000 required sales of $11,880,000 to break even.
Some topics in this essay:
Sandra Stiletto,
Let’s Harvey,
Wtd Average,
Breakeven Level,
Normal Total,
AA Exhibit,
Ted’s Furthermore,
Apparently Gump,
League B-School,
Hazlitt Corporation,
exhibit 3,
fixed costs,
variable cost,
harvey gump,
level operations,
fixed costs $4455000,
jack welch,
sales volume,
operations achieved,
sandra stiletto,
unit sales,
level operations achieved,
implied data column,
data column 1,
wtd average unit,
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Approximate Word count = 1465
Approximate Pages = 6 (250 words per page double spaced)
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