Cost Volume Profit case study , accounting homework help

Accounting

### Question Description

700 word paper addressing the below on a given scenario. More detailed information on attachement.

• 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.
• 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.

### 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®. Format your assignment consistent with APA guidelines. Click the Assignment Files tab to submit your assignment. ...
Purchase answer to see full attachment

Please find attached. Thank you.

Outline
I.

Introduction

II.

Conclusion

III.

References

Running head: COST VOLUME PROFIT CASE STUDY

Cost Volume Profit Case Study
Name
Institution

COST VOLUME PROFIT CASE STUDY

2

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

Contribution Margin per Unit = (40-24) = 16
Break even points in form of dollars = 16x 20,000 = 320,000
Break even = (320,000 – 270,000) = \$ 50,000/ 320,000 = 15.625%
270,000/16 = 16,875
Current Break-even = 16,875 pair of shoes

Proposed = (24,000+270,000) = 294,000
Margin = 14 x 19,000= 266,000
Break-even = 28,000
28,000/ 266,000 = 1.07%
New Breakeven point = 294,000/ 14 = 21000 units
Compute the margins of safety ratio for current operations and after Mary’s changes are
introduced (Round to nearest full percent)

Current Margin Safety Ratio = (270,000 + (20,000 x24)) = \$ 750,000/46,875 = 16%

New Margin Safety Ratio = (266,000 + (24,000 x 24)) = \$ 842,000/ 64,679 = 13%

Prepare a CVP (Cost-Volume-Profit) income statement for current operations and after
Mary's changes are introduced
BARGAIN SHOE STORE CVP INCOME STATEMENT
Sales

Current
\$ 80,000

New
\$ 91,200

COST VOLUME PR...

peachblack (34737)
Duke University
Review

Anonymous
Top quality work from this tutor! I’ll be back!

Anonymous
It’s my second time using SP and the work has been great back to back :) The one and only resource on the Interwebs for the work that needs to be done!

Anonymous
Thanks, good work

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors