Accounting Discussion 3

"CVP Analysis in Service Companies" Please respond to one of the following:

Option 1

• Imagine that you are the cost accounting manager and the director of your present or past organization. Management wants your opinion on whether the company should manufacture a new electric car. You informed management that you will need to perform a sensitivity analysis prior to making that decision. Compose a brief report to management explaining the importance of preparing a sensitivity report. Identify two (2) questions the sensitivity analysis should answer.

Option 2

• Design a situation to demonstrate the impact of fixed costs on output for a service company.

Option 3

• Discuss how a service company might use target costing to improve their profitability.