Breeden Security, Inc. (A)

3 Pages Posted: 5 Apr 2010

See all articles by Brandt R. Allen

Brandt R. Allen

University of Virginia - Darden School of Business

Luann J. Lynch

University of Virginia - Darden School of Business

Abstract

Breeden Electronics USA is a start-up division of a German company. It plans to produce two products, both electronic signaling devices. Herman Klein, the division president, has asked his controller, Marlene Baer, to compute several break-even sales figures as they assess the sales level that is necessary to meet the profit target established by the parent company. Baer must conduct several break-even analyses and consider the impact on profit if production exceeds sales. This is the first in a series of two cases that can be used to explore the evolution of cost systems. The main issues of the two cases are as follows: in the A case, the company uses a traditional costing system. The main questions relate to breakeven analysis and the effect of inventory buildup on profit. The B case (UVA-C-2308) introduces the use of an activity-based costing system to allocate costs so that the company can assess both product and customer profitability. The two cases can be used in two classes or together in one class.

Excerpt

UVA-C-2307

June 19, 2009

BREEDEN SECURITY, INC. (A)

In October 2007, Herman Klein, President, and Marlene Baer, Controller, of Breeden Security USA were checking the budgeted figures for Breeden's 2008 operations. Breeden's parent company in Germany had established a target profit for Breeden of $ 210,000 for the upcoming year. Klein and Baer wanted to make sure they could meet that target.

The Company

In early 2007, Breeden Security GmbH, a large German manufacturer of radio equipment, had set up a subsidiary in the United States to manufacture two products Breeden had successfully marketed in Europe. One was a miniature signaling device used primarily for remote operation of garage doors. These “RC1” units consisted of a signal sender, about half the size of a pack of cards, and a receiver, which was a bit larger. They contained a high-security chip, which gave them an advantage over almost all the other units in the marketplace. A large manufacturer of motorized garage doors had agreed to take a minimum of 100,000 RC1 control units a year. Klein and Baer thought that 120,000 units was a reasonable target for 2008 from this customer.

. . .

Keywords: traditional based costing, ABC, break-even

Suggested Citation

Allen, Brandt R. and Lynch, Luann J., Breeden Security, Inc. (A). Darden Case No. UVA-C-2307, Available at SSRN: https://ssrn.com/abstract=1583299

Brandt R. Allen (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924 -4842 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/allen.htm

Luann J. Lynch

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4721 (Phone)
434-243-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/lynch.htm

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