1. What are the assumptions implicit in Bill French’s determination of his company’s break-even point?
2. On the basis of French’s revised information, what does next year look like?
a. What is the break-even point?
b. What level of operations must be achieved to pay the extra dividends, ignoring the union demands?
c. What level of operations must be achieved to pay the union demands, ignoring the bonus dividends?
d. What level of operations must be achieved to meet both dividends and expected union requirements?
3. Can the break-even analysis help the company decide whether to alter the existing product emphasis? What can the company afford to invest for additional “C” capacity?
4. Calculate each of the three products break-even points using the data in exhibit 3. Why is the sum of these three volumes not equal to the 1,100,000 units aggregate break-even volume?
5. Is this type of analysis of any value? For what can it be used?