3-4 Page Project

timer Asked: Jul 4th, 2018
account_balance_wallet $40

Question description

You are an economist for the Vanda-Laye Corporation, which produces and distributes outdoor cooking supplies. The company has come under new ownership and management and will be undergoing changes in its product lines and operating structure. As an economist, your responsibilities include examining the market factors that affect success or failure of a product, including the supply and demand for the product, market conditions, and the behavior of competitors with similar products.

The new owners are evaluating the operating structure, and you have two possible alternatives. One alternative requires a high level of investment in fixed costs compared to the other alternative. Jorge, your supervisor, has assigned you the task of evaluating the two alternatives.

Assume that the company has no debt. Regardless of the alternative selected, market conditions will require the selling price of the product to be $3.45 per unit. The details for each alternative are given in the table.

Alternative 1

Alternative 2

Variable costs



Fixed costs



Total assets




Jorge has asked you to provide detailed responses to the following questions:

  • Analyze how the CVP analysis helps management in the planning stage of a new business.
  • What is the break-even quantity for each of the investment alternatives?
  • Analyze the breakeven differences between the two alternatives. What does the breakeven quantity tell you?
  • Which alternative would you recommend to the company? Explain the pros and cons of each alternative and the reasons for your selection.

Tutor Answer

School: University of Virginia

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Vanda-Laye Corporation
Institution affiliation




How Does CVP Analysis Help Management In The Planning Stage Of A New Business
CVP is a decision-making technique that relates the cost of production to the profit
generated from the production process. It is helpful for management of a business entity in the
planning stage because it provides accurate information that can be used to make more
informative decisions (Son, 2014). The CVP analysis is an object-oriented decision-making tool
that provides access to the future direction that the new business entity will take. All the issues
and uncertainties that the business entity may face in its initial stages can be easily analyzed
using the CVP analysis.
The manager will thus rely on CVP as an analytical tool to predict spending that will occur in
the future and also production to work towards the benefit of a business. This will help avoid
failure. CVP is also able to provide a snapshot of the activities occurring within the company.
This can include costs of product and product produced (Hilsenrath, 2013). The cost-volumeprofit analysis will help the ...

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Outstanding Job!!!!

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