Halstead Jewelers Case Study Analysis

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Hallstead Jewelers Case Study

...Hallstead Jewelers Case Study Amanda Dutcher October 6, 2011 1) Fixed Costs=Salaries+Advertising+Administrative Expenses+Rent+Depreciation+Miscellaneous expenses Breakeven=Fixed Costs/Contribution Margin 2003-3230000/377.03=8,566.96 units 2004-3333000/357.68=9,318.39 units 2006-4921000/352.52=13,959.49 units Breakeven$=Breakeven Units*Unit Price 2003-8566.96*845=$7,239,079.12 2004-9318.39*812=$7,566,532.68 2006-13959.49*819=$11,432,822.31 Margin of Safety=Sales-Breakeven Sales 2003=8583000-7239079.12=1343920.88=15.66% 2004=8102000-7566532.68=535467.32=6.61% 2006=10711000-11432822.31=-721822.31=6.74% The breakeven point increases from year to year because of the increases in fixed costs. Because these costs are increasing, the company needs to produce and sell more units in order to cover them. The margin of safety decreases from year to year for the same reason. The change from 2003 to 2004 for breakeven units and the margin of safety were not nearly as significant as the change in 2006. This change in fixed costs is because they moved to a new, larger location causing them to increase dramatically. This caused for not only an increase in rent, but also most likely an increase in the amount of employees. This major increase in fixed costs is what caused the major change in both the breakeven point and the margin of safety. 2) New Price=$737.10 New Sales Volume=14,0000 Sales=$10,319,400 $10,319,400-10,711,000=$-391,600 The decrease in price also......

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Hallstead Jewlers

...Hallstead Jewelers was one of the largest jewelry and gift stores in the United States for 83 years.   Customers came from throughout the region to buy from extensive collections in each department.   Any gift from Hallstead’s had an extra cache attached to it as they were known for having the best.    Even though the principal retail shopping areas shifted two blocks west, Hallstead’s reputation and selection still brought in customers.   In 1999 however, sales became stagnate and profits were starting to slip.   The owners (two sisters, Gretchen and Michaela) made several changes in an effort to revitalize the store back to its full glory.   The largest decision they made was to move the stores location, expanding it by 50% more space and selling staff.   This move resulted in a five-year lease as well as extensive and expensive renovations.   They also made some changes in product offerings and offered more sales potential at the cost of minor reductions in margins. During the year it took to complete the Hallstead’s renovation the industry started showing major changes toward internet based jewelry sales.   Tiffany & Company, a business with an origin much like Hallstead Jewelers, grew into an international powerhouse.   At the same time, a start-up internet seller, Blue Nile, became the second largest diamond seller in the U.S.   While Hallstead’s was growing their fixed costs by doubling their rent payments, Tiffany and Blue Nile were increasing their revenue with...

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Hallstead Jwelers Case Study

...Hallstead Jewelers (Case Study1) Accounting 2301 Managerial Accounting Professor May Spring 2013 By: Madhur Mittal, Ishaq Rehman, Ying Wang and Bohan Li Question 1 Breakeven is a point at which a company covers all its costs and its profit is zero. After reviewing Hallstead Jewelers Income Statement, operational statistics, and table 2 and 3, for fiscal years 2003, 2004, and 2006, we can see a slight change in the breakeven unit and dollar amounts between the fiscal year of 2003 when compared to 2004. At the same time we also examine a major change when comparing the breakeven points of the fiscal year 2004 to 2006. This can be seen in Tables 1, 2, and 3. Hallstead Jewelers | Income Statement | For the years 2003, 2004, and 2006 (In thousands) |   | 2003 | 2004 | 2006 | Total Sales | $8,583 | $8,102 | $10,711 | Variable Costs |   |   |   | Cost of Goods Sold | $4,326 | $4,132 | $5,570 | Commissions | $429 | $405 | $536 | Total Variable Costs | $4,755 | $4,537 | $6,106 | Contribution Margin | $3,828 | $3,565 | $4,605 |   |   |   |   | Fixed Costs |   |   |   | Salaries | $2,021 | $2,081 | $3,215 | Advertising | $254 | $250 | $257 | Administrative Expenses | $418 | $425 | $435 | Rent | $400 | $400 | $750 | Depreciation | $84 | $84 | $142 | Miscellaneous Expenses | $53 | $93 | $122 | Total Fixed Costs | $3,230...

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Hallstead

...2004, Hallstead resided in their previous location which held 10,230 square feet. Between these years, there is an increase in their break-even point, but this change can be associated with a down year in sales. Their sales decreased by approximately $481,000. Along with that, we can see that Hallstead’s fixed costs remained stable, only increasing by $103,000. The year to focus on is the change in Hallstead’s location when they moved to a new store with 5,050 more square feet. With this change, their fixed costs rose immensely, and they failed to account for a necessary change in advertising. Hallstead was running their business in the same manner they did during their years in the smaller store. The margin of safety in 2003 was 20.35%. In 2004, this decreased to 8.71%, and the margin of safety for 2006 was – 7.82%. This value for 2006 is insignificant because they lost money. The margin of safety quantifies the cushion in percent of sales the firm has before they reach the break-even point. 2. While this idea may seem appropriate to put Hallstead on track, it is in fact a poor decision as net income decrease even more. The net income in this case would a negative value at - $1,124,160. The break-even point would increase to 15,507 units sold, and the break-even point in sales dollars would increase to $13,551,567.30. 3. This idea would not only decrease the break-even point in units sold to 10,662 units but it would also create a positive net income for Hallstead......

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Case Study

...Break-even point (Unit and Dollar) changed, like fixed cost, variable cost and contribution margin. When the fixed cost increase and the contribution margin decrease, the Break-even point (Unit) will go up. Therefore, the Break-even point (Dollar) also increases. In the part of margin of safety (%), it’s changed from 8.4%, 3.7% and -8.0% within 2008,2009 and 2011. This is due to the margin of safety (%) is calculated by subtracting the Break-even (Dollar) from budgeted sales. In other words, although the budgeted sales increased, Hallstead Jewelers’ Break-even point (Dollar) also increased and higher than budgeted sales in 2011. Hence, the margin of safety (%) dropped every year. (Index 1) 2. Although Hallstead Jewelers’ net income increased in 2008 and 2009, their income would be loss of 299,600 in 2011. (Index 2) 3. Gretchen through eliminating sales commissions to reduce variable cost so that made net income increased. Especially in 2011, Hallstead Jewelers’ net income is negative in question 1. With the elimination of sales commissions, however, the company’s net income changed to the positive profit. In the meantime, variable costs go up leading to an increase in net income for every unit sold. (Index 3) 4. Comparing break-even point with question 1, the break-even points (Unit and Dollar) decreased. That means the sisters got less revenue. When we see operation income, however, it will increase $200,000 in 2008,2009 and 2011. I suggested sisters try to cut......

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Hallstead Jewelers Case

...Hallstead Jewelers Case 1. The breakeven point in number of sales tickets between 2003 and 2004 went up from 4,535 to 5,000. In terms of sales dollars it increased from 7,287,745 to 7,620,000. This happened because while variable costs actually went down, their average sales ticket went down by 83 which caused them to have to sell more to break even. The breakeven point from 2004 to 2006 went up from 5,000 to 7,509. Breakeven in terms of sales dollars increased from 7,620,000 to 11,661,477. Though the average sales ticket went up some, it was not enough to cover the increase in variable and fixed costs which were probably caused by the move of location. Margin of Safety between 2003 and 2004 decreased from 1,295,255 to 482,000. Because the average sales ticket went down so much while sales remained relatively the same, they did not make enough profit to keep the same margin of safety. Between 2004 and 2006 margin of safety went down from 482,000 to –950,477. Sales tickets between these two years went up significantly, but it was not enough to cover the large increase in fixed and variable costs. This caused them to be well below the break-even in sales dollars. 2. If the average sales ticket was reduced to 1,398 and sales tickets were increased to 7,500, income would actually decrease from -406 to -1,112. The new break-even point in sales units would be 9,780, and the new break-even in sales dollars would be 13,672,440. 3. All else consistent......

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Hallstead

...An expert and professional manager can assess situations in a different manner since he can actually talk to the clients and can draw conclusions which an Expert System would not be able to determine. This fact is more strengthened by the fact that this particular banking sector involves millions of pounds and cannot be managed in an irresponsible manner. Although the margin of error of Artificial Intelligence may be minimal, this should further be reduced by involving human intervention to examine and counter-check the work done by Expert Systems. After all, interaction between client and the bank must exist in one way or another. Delicate matters such as money borrowing need to be based on a reciprocal trust between both parties (in this case the client and the bank representative) and Expert Systems, however accurate, cannot provide such interaction. Decision Support Systems A Decision Support System is a type of Information System whose principal objective is to support human decision-making in the circumstances that human judgement and computer processing are needed. Decision Support Systems are generic in nature therefore they have a wide coverage. They are extremely useful because by simply altering their variables, they can emulate diverse scenarios. They assist managers with unique, non-recurring strategic decisions that are relatively unstructured. DSS, therefore, tend to support tactical and strategic decision-making in situations where the risk associated......

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Hallstead Jewelers

...The breakeven point in units and in sales dollars has increased each year from 2003 to 2006 (with the renovation year of 2005 having been skipped). From 2003 to 2004, breakeven increased by 10.28% in units and 4.58% in dollars. These increases occurred because, while variable costs decreased by 4.58%, average ticket (unit) price decreased by 5.16%, meaning Hallstead was getting a lower contribution margin per ticket/unit. Fixed costs also slightly increased from 2003 to 2004, which in turn contributing to increasing breakeven point. Breakeven increased drastically from 2004 to 2006, increasing by 50.07% in units and 52.93% in dollars. The biggest reason for this is the massive increase in fixed costs. Particularly salaries, which increased by $1.134 million from 2004 to 2006 (54% increase from 2004 to 2006) and rent, which doubled from 2004 to 2006, increasing by $420,000. In this case, margin of safety indicates how much sales did Hallstead actually make above breakeven level, instead of using a budgeted or expected sales value. For 2003, if Hallstead’s sales were 15.09% lower, they would have been at exactly breakeven sales level. Margin of safety decreased significantly from 2003 to 2004, because Hallstead’s sales decreased while its breakeven point increased. Margin of safety continued to drastically decrease from 2004 to 2006 and was actually negative in 2006, meaning they needed to make 8.82% more in sales to have reached breakeven. This occurred because, even though......

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Hallstead Jewelers Case

...Hallstead Jewelers Case 1. According to the Exhibit 1 provided in the case, we set up new income statement for 2003, 2004 and 2006 (see exhibit a). The variable cost includes cost of good sold and commissions, and the fixed cost cover other things include selling expense, salaries, advertising, administrative expenses, rent, depreciation, and miscellaneous expenses. Then the brief result shows in the table below. | 2003 | 2004 | 2006 | Break-even point in dollars (in thousand of dollars)= Fixed cost/contribution margin ratio | $7,287.03 | $7,620.20 | $11,655.34 | Break-even point in units (sale ticket)= Break-even point in dollar/Sales per tickets | 4535 | 5000 | 7506 | Margin of Safety= (Budgeted sales - Break-even point sales)/Budgeted sales | 15.10% | 5.95% | -8.82% | (Table 1. All the related data can be found in exhibit a.) Both the break-even point in dollars and the break-even point in units increase a lot, and the margin of safety drops down to negative in 2006. The changes were caused by the huge increase in fixed cost (especially the rent since the bigger place they moved to in 2005). 2. If average prices were reduced ten percent and the number of sales tickets increased to 7500, the company’s income would be a net loss as $(1,109,410). And new breakeven point in sales would be 9633, and the new breakeven point in dollar would be $13,463,440. The income statement would be in the exhibit b. | Net Income/loss(Thousand of dollars) |......

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Hallstead Jewelers

...Hallstead Jewelers Overview: Hallstead is a family owned business that has been in business for 83 years. They sell fine jewelry and gems, watches, and tabletop gifts. Gretchen Reeves and her sister Michaela Hurd took over the business in 2002. Prior to them taking over the business, their father and previously their grandfather had managed the business at its original Lake Avenue location. The original location was a prime location back when the store opened. Since then the main shopping area moved a few streets over to Washington Street. When the sisters took over the business profits had already been slipping for several years. The sisters hired a consultant who recommends they move to a new location where they could have more space and fresh new look. Upon a location becoming available on Washington Street, they move the business in 2005. Moving took most the year to accomplish so they were considering that year a loss. Based on the preliminary income statement for 2006, they had a loss almost double the income of 2004 which was the last “normal” year. The sisters are determined to figure out what happened between 2004 and 2006. Their consultant suggested to consider increasing their advertising for the new location or changing their pricing strategy to compete with internet companies. Additionally, Gretchen wanted to consider stopping the sales commissions since they were the only store in the city to still pay them. Both their father and......

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Howard Street Jewelers

...items. e. Proper documentation – provide evidence that financial statements are accurate. Controls designed to ensure adequate recordkeeping include the creation of invoices and other documents that are easy to use and sufficiently informative; the use of prenumbered, consecutive documents; and the timely preparation of documents.there were problems with maintaining proper trail documentation or with missing documentation which should have been monitored and entered into system to keep an easy track of instead of depending on filing papers. In order to identify and establish effective controls, management must continually assess the risk, monitor control implementation, and modify controls as needed.  Summary of the Case: Howard Street Jewelers Inc. is a small retail business owned by Mr. & Mrs. Julius Levi for more than 40 years. Undoubtedly, the company had its ups and downs. It survived its previous sales slack by cutting costs. Currently, the business is experiencing a continuous downward spiral of its cash position notwithstanding the safety measures the company had taken. With that, Mrs. Lore Levi got alarmed that the jewelry company might close. Mrs. Levi has a logical assumption that Betty, the trustworthy and reliable cashier, might be stealing from the cash register since Betty is the one managing the cash and maintaining the cash receipts and sales records for almost 20 years. Having Betty as a suspect, Mrs. Levi approached and discussed this......

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Hallstead Jewelers Case Study

...Hallstead Jewelers How has the breakeven point in number of sales tickets (number of customer orders written) and breakeven in sales dollars changed from 2003 to 2004, and to 2006? How has the margin of safety changed? What caused the changes? The break-even point in the number of sales tickets for 2003, 2004, and 2006 are 4,535, 5,000, and 7,505 respectively. The break-even point in sales dollars for 2003, 2004, and 2006 are $7,287,043, $7,620,696, and $11,655,277 within these years. The margin of safety is the difference between the expected level of sales and break-even sales. Since there is no expectation of sales mentioned in the case report, a constant level of expected sales is assumed. If the expected level of sales remains constant, the break-even sales point will increase as the margin of safety decreases. Within these years, the margin of safety changed from 15%, 6%, to -9%. As shown in Table 1, fixed costs increased along with the break-even sales point and sales did not meet expectations, therefore the company reported a loss in 2006. This was caused by an increase in salaries (larger storage room), administrative expenses, miscellaneous expenses, depreciation (increase in assets from the larger store), and rent expenses (new store); which all caused an increase in fixed costs and break-even sales. Table 1: Break-even Sales Calculations (thousands of dollars) 2003 2004 2006 Sales $8,583 $8,102 $10,711 Less variable costs: Cost of......

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Halstead Case

...Hallstead Jewelers – Individual assignment ACCT 503 – NMSU – Mills – Spring, 2016 When I lived in San Antonio, I was a loyal customer to James Avery Jewelers [ http://www.jamesavery.com/ ]. I believe the company demonstrates how a jeweler can adapt and grow over decades by changing product lines, expanding on line, etc. You might find the website informative about the history of the company, types of product, and ways to market that could help you spice up this case. Maximum points: 100 points Objectives: ➢ Perform breakeven analysis ➢ Practice using Excel spreadsheets ➢ Reinforce writing and critical thinking skills Required: Read the Hallstead Jewelers case published by Harvard Business School. Within this document, after each question, double space and begin your response (single-spaced). Double-space before you begin the next question. Place the answers only in the space provided. Save this document with a filename that shows your last name, first name, and Halstead, course and semester (e.g. Mills_Sherry_Hallstead_503_Sp16). Work your calculations using the excel spreadsheet that I have provided you. Copy and paste special as a picture, your work into this Word document after the appropriate question. Also, save the excel file with a filename that shows your last name, first name, Hallstead, course and semester. Attach your Word and Excel files in the Canvas assignment dropbox. In order to receive full credit, use excel to make......

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Hallstead Jewllers Case Final Draft

...Due Date: 24th May 24, 2016 Hallstead Jewelers Professor James Reagan Carly Cugine Fernando Morey Perez Olivia Hajas Uday Saha Yineng Zhang Part 1 **In Thousands** Variable Costs | 2003 | 2004 | 2006 | Sales Ticket Units | 5341 | 5316 | 6897 | Average Sales Ticket | 1607 | 1524 | 1556 | Sales | 8583 | 8102 | 10711 | Variable costs | | | | COGS | (4326) | (4132) | (5570) | Commission | (429) | (405) | (536) | Total Variable Cost | (4755) | (4537) | (6106) | Total Contribution Margin | 3828 | 3565 | 4605 | Contribution Margin Per Unit | .7167 | .6706 | .6677 | Fixed Cost | 2003 | 2004 | 2006 | Salaries | 2021 | 2081 | 3215 | Advertising | 254 | 250 | 257 | Administrative Exp | 418 | 425 | 435 | Rent | 420 | 420 | 840 | Depreciation | 84 | 84 | 142 | Misc. | 53 | 93 | 122 | Total | 3250 | 3353 | 5011 | Breakeven analysis: For this part of the case study we used the following formulas to get Breakeven in units and Breakeven sales. The calculations can be found below and are in thousands of dollars. * Breakeven # of tickets = total FC / (selling price per ticket - VC per ticket) * Breakeven in sales dollars = [total FC / (selling price per ticket - VC per ticket)] * (selling price per ticket) or total FC/ CM ratio * Margin of Safety = Expected Sales - Breakeven in Sales Dollars Results | 2003 | 2004 | 2006 | Break even # units | 4,535 | 5,000 | 7473 | Break even sales dollars |......

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Halstead Jewelers Income Statements 2003 2004 2006 Sales $8,583,000 $8,102,000 $10,711,000 Cost of goods sold $4,326,000 $4,132,000 $5,570,000 Gross Margin $4,257,000 $3,970,000 $5,141,000 Expenses Seling Expense Salaries $2,021,000 $2,081,000 $3,215,000 Commissions $429,000 $405,000 $536,000 AdverTsing $254,000 $250,000 $257,000 AdministraTve expenses $418,000 $425,000 $435,000 Rent $420,000 $420,000 $840,000 DepreciaTon $84,000 $84,000 $142,000 Miscellaneous expenses $53,000 $93,000 $122,000 ±otal expenses $3,679,000 $3,758,000 $5,547,000 Net Income $578,000 $212,000 ($406,000) Halstead Jewelers - OperaTng StaTsTcs Sales Space (square feet) 10,230 10,230 15,280 Sales per square foot $839 $792 $701 Sales Tckets 5,341 5,316 6,897 Average sales Tcket $1,607 $1,524 $1,553 Variable cost per Tcket $810 $777 $808 Queston1 2003 2004 2006 Sales ±ickets: 4,616 5,033 7,442 # Tckets = (proFt - ±²C)/(SP-VC) Sales Dollars: $7,417,643 $7,669,759 $11,556,831 sales =breakeven Tckets * Average Sales ±icket Notes. Margin of SafeTy 2003 2004 2006 Margin of Safety = expected sales - breakeven sales Expected Sales $8,583,000 $8,583,000 $12,874,500 Breakeven Sales: $7,669,759 $11,556,831 Margin of Safety: $913,241 $1,317,669 Queston 2. Details 2006 Sales ±ickets: 6,897 7,500 Sales Price $ 1,397.70 Average sales Tcket: $1,553 $1,398 @ 10% decrease Unit Sales 7,500 Variable cost per Tcket: $808 $808 Sales Revenue $ 10,482.75 Halstead Jewelers Cost of good sold $ 6,056.98 Incremental Analysis Contribution Margin $ 4,425.77 Sales $10,711,000 $10,482,750 ($228,250) Other Expenses Cost of goods sold $5,570,000 $5,570,000 $0 Salaries $ - Gross Margin $5,141,000 $4,912,750 ($228,250) Commission $ - Expenses Advertise expenses $ - Seling Expense Administrative expense $ 200,000.00 Salaries $3,215,000 $3,215,000 $0 Miscellaneous expenses $ - Commissions $536,000 $536,000 $0 Rent $ - AdverTsing $257,000 $257,000 $0 Depreciation $ - AdministraTve expenses $435,000 $435,000 $0 Total Other Expenses $ 200,000.00 Rent $840,000 $840,000 $0 DepreciaTon $142,000 $142,000 $0 Net Income ÷ (Loss) $ (195,574.23) Miscellaneous expenses $122,000 $122,000 $0

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