ACC 561 WEEK 5 Cost-Volume-Profit Analysis
ACC 561 WEEK 5 Cost-Volume-Profit
Analysis
ACC 561 WEEK
5 Cost-Volume-Profit Analysis
ACC 561 WEEK 5 Cost-Volume-Profit Analysis
ACC 561 WEEK 5 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.
Click the Assignment Files tab to
submit your assignment.
V112417
ACC 561 WEEK 5
Cost-Volume-Profit Analysis
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