Essay on Bridgestone

1387 Words Apr 15th, 2014 6 Pages
Issues for Discussion 1. What is the weighted average contribution margin (WACM) percentage for Bridgestone’s next annual budget?
WACM = Contribution Average/Total Revenue WACM = $3,500,00/5,000,000 WACM = 70% 2. What does a high weighted average contribution margin (WACM) percentage mean for the management of Bridgestone?

3. Is Bridgestone able to plan for breakeven or a modest over-recovery of expenses (or profit) for the next year? If the center achieves breakeven or a modest over-recovery and you are concerned about events that could cause a potential loss, what would you try to change? (You may consider both on- and off-campus programs.)

Break-even = Fixed Cost/WACM
$3,493,700/70% = $4,991,000
Profit = CM – FC
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7. How can the budgetary weighted average contribution margin percentage be used to help control the actual operations of Bridgestone?
The budgetary weighted average contribution margin percentage can be used to help control the actual operations of Bridgestone by giving an insight into how that area of operation should be performing. If there are significant changes in any specific area of operation, the management should be informed in order to make operational adjustments to stay on the profitable financial track. 8. If a budgetary weighted average contribution margin percentage has been developed with an expected level of revenue and a planned fixed cost and the budgetary WACM percentage is in fact achieved in the next (future) time period, could the organization still face losses if the total revenue drops below the budgeted levels or total fixed costs increase beyond the budgeted levels? Can you explain how losses still might occur even though the planned WACM percentage is being realized in the future time period?
If the revenue does not meet the expected level, the WACM could still maintain its projected percentage,

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