Create Memo based on calculations (already completed), CVP, Break-Even, Margin of Safety

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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.

Unformatted Attachment Preview

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®. ...
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Tutor Answer

prof_mikewillims
School: Carnegie Mellon University

Attached.

Running head: INFORMAL MEMO1

Informal Memo
Name
University Details
Date of Submission

INFORMAL MEMO 2
Informal Memo
To: Management
From: Marketing Department
Date: 12 April, 2017
Subject: Mary Willis’ Major Changes to Promotional Campaign
May I begin by pointing out that there has for a long time been the need to address the
issue of marketing in this company – not only in terms of the costs incurred in the process of
marketing, but in terms of the capacity of the marketing efforts to reach the right consumer
audience for the company’s shoes. Mary Willis’ efforts have addressed specifically these issues,
i.e. cost and reach capacity. But that said, it is only understandable that the management should
also be concerned about the true implications of these changes, especially on break-even point
and margin of safety ratio, which have to do with the risks of implementing Mary’s propositions.
This memo aims to clear these issues and show that Mary’s propositions are not right fo...

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Anonymous
Goes above and beyond expectations !

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