Requirements: Read the Breeden Security, Inc. (A) Case on pages 20-22 of your case book. Answer the following questions on the red tabs that follow. Please rename the file. For Individual

Files (Last & First Name, Case Name). For Group Files (Group #, Case Name). 1. Calculate the per unit variable and fixed costs assuming that Breeden manufacturers 15,000 total units (10,000 and 5,000) of RC1 and RC2. Prepare a traditional income statement to determine the amount of profit (or loss) that Breeden would incur if sales were 8,000 units of RC1 and 4,000 units of RC2. (The units not sold remain in finished goods inventory.) Analyze the difference in profitability and calculate the value of the remaining inventory. 2. Calculate the fixed costs per unit assuming that Breeden manufactures 12,000 total units (8,000 and 4,000) of RC1 and RC2. Prepare a traditional income statement to determine the amount of profit (or loss) that Breeden would incur if production and sales were 8,000 units of RC1 and 4,000 units of RC2. 3. Discuss the result obtained and #1 and explain why the profit differs from the answer obtained in #3 given that sales are the same quantity. Expand on: What is causing the difference between the two scenarios (be specific)? You are working with budgeted scenarios. What are the underlying assumptions that are being made and how might you improve the analysis to include alternative assumptions? 4. Calculate the number of units of RC1 and RC2 (based on constant sales mix of 2:1) to breakeven for the year. Create a contribution margin income statement to prove the result. 5. Determine the number of units necessary to achieve a $210,000 profit before tax. Create a contribution margin income statement for the year to prove the result. Compute the margin of safety in units and sales dollars at the target profit level of $210,000. Create a traditional income statement and determine the amount of fixed MOH allocated to inventory to resolve the difference in profitability for the year. 6. Explain the purpose of safety stock. For this case, consider the carrying cost of inventory and the trade-off imposed by generating safety stock. How should this be resolved? Is the strategy of producing more than you are selling a sustainable long-term strategy? What does it depend on? 7. Review the formula for calculating the pre-determined overhead rate for allocating the manufacturing overhead to the product lines? In other words, how did Breeden obtain the $2 in MOH for every $1 in DL amount? Is this considered a traditional approach? What are the potential drawbacks of using this approach and how might they be remedied (read workbook)? 8. The GAAP requirements for creating financial information (called absorption costing or full costing) differs from non-GAAP accounting information like contribution margin and lean accounting information. Although all publicly traded companies are required to follow GAAP requirements, many public companies are reporting some non-GAAP measures like contribution margin (a lean measure) as it is extremely useful for decision making. Research the inclusion of Non-GAAP information in a public company's annual report. Many start-up companies (hoping to go public) choose to report contribution margin as NON- GAAP information as often times GAAP income is negative (a loss) and contribution margin is positive (indicating that perhaps they just haven't reached scale yet). Discuss your research and reflect on this given what you've learned about per-unit fixed costs. Also, do you find it odd that the GAAP requirements drive results like those observed in this case (that profits increase when inventory levels rise)? Isn't this counter-intuitive to what you might expect and address how it has the potential to drive inefficient decision making? (Caution: please do not confuse non-GAAP information with non-accrual accounting as they are distinctly different issues.)