| Wk 5 Cost-Volume-Profit Analysis |
| Scenario Details Provided |
| | Current data | | Jessic Proposal |
| Sales per pair | 40 | | 38 |
| Variable cost per pair | 24 | | 24 |
| Sales volume | 20,000 | | 24,000 |
| Fixed Cost | 270,000 | | 24,000 |
| 1. Compute the current break-even point in units, and compare it to the break-even point in units if Jessica's ideas are used. |
| | Current | | Jessica Proposal |
| Current sales per pair | 40 | | 38 |
| Less Current Variable cost per pair | 24 | | 24 |
| Current Contribution per pair | 16 | | 14 |
| Current sales volume | 20,000 | | 24,000 |
| Current Fixed Cost | 270,000 | | 294,000 |
| Current BEP | 16,875 | | 21,000 |
| The current BEP is 16,875 pair of shoes |
| The new BEP as per Jessica's proposal 21,00 pair of shoes |
| 2. Compute the margin of safety ratio for current operations and after Jessica's changes are introduced (Round to nearest full percent). |
| | Current | | Jessica's Proposal |
| Current Sales Volume | 20,000 | | 24,000 |
| Curent BEP | 16,875 | | 21,000 |
| Margin of safety | 3,125 | | 3,000 |
| Margin of safety ratio with sales | 16% | | 13% |
| Current margin of saftey ratio is 16% |
| New Margin of safety ratio Per Jessica's Proposal is 13% |
| 3. Prepare a CVP (Cost-Volume-Profit) income statement for current operations and after Jessica's changes are introduced. |
| Specialty Shoes (Current) | | | Specialty Shoes (after Jessica's Proposal) |
| CVP Income Statement | | | CVP Income Statement |
| For the Month Ending June 30, 2020 | | | For the Month Ending June 30, 2020 |
| Sales Revenue | 800,000 | | Sales Revenue | | | 912,000 |
| Less Variable costs | 480,000 | | Less Variable costs | | | 576,000 |
| Contributions Margin | 320,000 | | Contributions Margin | | | 336,000 |
| Less fixed costs | 270,000 | | Less fixed costs | | | 294,000 |
| net income | 50,000 | | | | | 42,000 |
VYdOlINrON6i
Wk5Cost-Volume-ProfitAnalysis.xlsx
