week 5 analysis assignment Cost Volume Profit Analysis

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Question description

Cost-Volume-Profit Analysis

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

strongboss5
School: UC Berkeley

Kindly see attached file

Running head: COST-VOLUME-PROFIT ANALYSIS

Cost-Volume-Profit CVP Analysis
(Name)
(Course)
(Date)

1

COST-VOLUME-PROFIT ANALYSIS

2

Cost-Volume-Profit CVP Analysis
Description of the scenario
As part of her work on a promotional campaign, Mary Willis has recommended that the
Bargain Shoe Store installs a new lighting system.40 She has estimated that its installation will
add $24,000 in fixed costs to the current ones ($270,000). In order to account for the increased
costs, Mary has suggested the company managers to decrease the selling price by $2 to a final
price of $38, since she believes that this would increase the sales from 20,000 to 24,000 pairs of
shoes.
In order to evaluate the impact of the installation of the new lightning system, the
company managers have requested me to perform a CVP analysis to evaluate the break-even
point and the margin of safety of the proposed...

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Review

Anonymous
Outstanding Job!!!!

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