Hallstead Jewelers Essay

708 Words3 Pages
Hallstead Jewelers Case Study | 2003 | 2004 | 2006 | Total Fixed Costs ($)(In Thousands) | 3,177 | 3,240 | 4,799 | Sales ($)(In Thousands) | 8,583 | 8,102 | 10,711 | Total Variable Cost ($)(In Thousands) | 4,808 | 4,630 | 6,228 | Number of Sales tickets | 10,153 | 9,967 | 13,063 | Sales Revenue Per Unit ($) | 845.37 | 812.88 | 819.95 | Variable Cost Per Unit ($) | 473.56 | 464.53 | 476.77 | Contribution Margin ($)(In Thousands) | 3,775 | 3,472 | 4,483 | Contribution Margin Per Unit ($) | 371.81 | 348.35 | 343.18 | Break Even Point in # of Units | 8,544 | 9,301 | 13,984 | Break Even Point in Sales Dollars ($) | 7,222,841 | 7,560,597 | 11,466,180 | Margin of Safety (%) | 15.9% | 6.7% | -7% | 1) Over the three years that we examine in the case, the Break Even Point in sales dollars increases. This can be expected as production and expenses increase, however it is important to note the large jump in 2006. Granted, this is after two years during an expansion. The margin of safety has decreased. This measures the risk of investing in a company. In other words, the decline in margin of safety shows that the difference between sales completed and sales needed to break even getting smaller. These changes can be attributed to their total sales amounting to a value less than the breakeven point in sales. 2) If average prices were reduced 10%, and sales tickets were increased to 14,000 the income of the company would increase. However, even with this change in values, the company is still under its breakeven point. The new breakeven point, with a 10% decrease in average prices and an increase in units sold to 14000, would be equal to 14,945 units and $10,297,105. 3) Gretchen’s idea to eliminate sales commissions, morally, may not be the correct decision because it works in a way to motivate the sales people. Without this commission, in the

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