Cost-Volume-Profit Analysis (NO PLAGIARISM)

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timer Asked: Apr 6th, 2017
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Question description

Purpose of Assignment

The Case Study focuses on CVP (Cost-Volume-Profit), break-even, and margin of safety analyses which allows students to experience working through a business scenario and applying these tools in managerial decision making.

Assignment Steps

Resources: Generally Accepted Accounting Principles (GAAP), U.S. Securities and Exchange Commission (SEC)

Tutorial help on Excel® and Word functions can be found on the Microsoft® Office website. There are also additional tutorials via the web offering support for Office products.

Scenario: Mary Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $24,000 in fixed costs to the $270,000 in fixed costs currently spent. In addition, Mary is proposing a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $24 per pair of shoes. Management is impressed with Mary's ideas but concerned about the effects these changes will have on the break-even point and the margin of safety.

Complete the following:

Compute the current break-even point in units, and compare it to the break-even point in units if Mary's ideas are used.

Compute the margin of safety ratio for current operations and after Mary's changes are introduced (Round to nearest full percent).

Prepare a CVP (Cost-Volume-Profit) income statement for current operations and after Mary's changes are introduced.

Prepare a maximum 700-word informal memo to management addressing Mary's suggested changes.

Explain whether Mary's changes should be adopted. Why or why not? Analyze the above information (three bullet points above) and use this information to support your suggestion.

Show your work in Microsoft® Word or Excel®.

Complete calculations/computations using Microsoft® Word or Excel®.

Format your assignment consistent with APA guidelines.

Tutor Answer

captaint
School: Cornell University

check the attached and let me know ,thanks in advance.

Running head: CVP ANALYSIS

1

Name
University affiliation
Date

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CVP ANALYSIS
Cost volume analysis refers to the process used to determine the breakeven point of the
volume of goods sold and costs. CVP analysis is used by managers who intend to make short
term decisions. It is based on variable costing; only variable costs are used in decision making.
However, in order for this model to make sense, it relies on several assumptions. CVP analysis
argues that variable costs, fixed costs and the selling price will remain constant within a given
period of time (Ali & Moudud-Ul-Huq, 2013). Cost volume analysis can be used to evaluate
whether changing selling price and variable costs will result in an increase in revenues. For
instance, in this case study, Mary has proposed to management to change the selling price in
order to increase revenues. However, a critical analysis of these decisions shows that changing
the selling price will cause revenue...

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Review

Anonymous
Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

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