Required:
a) Using an excel sheet that shows the relevant formulas; calculate the break-even point
(in units as well as in dollars)for the original budgeted income statement provided above.
(Weight 10%)
b) Assuming thatAlternative (1)proposed above of reducing selling price and undertaking a marketing campaign was adopted, calculate the quantity that would need to be sold to yield a profit of $100,000.You are required to present your answers in an excel sheet that
shows the relevant formulas.
(Weight 20%)
c) RegardingAlternative(2)above,andassumingthattheorderfromanoverseascustomer for additional units was accepted, you are required to determine the volume of units that would need to be sold to the overseas customer to increase the profit from the current budgeted figure of $78,000 to the required figure of $100,000.You are required to present your answers in an excel sheet that shows the relevant formulas.
(Weight 20%)
d) It has always been argued that certain underlying assumptions place definite limitations on the use of CVP analysis. Therefore, it is essential that anyone preparing CVP information should be aware of the underlying assumptions on which the information is to be derived. If these assumptions are not recognized, serious errors may result and incorrect conclusions may be drawn from the analysis.In word format, discuss these assumptions underlying cost-volume-profit analysis.
(Weight 25%)
e) Regardingthetwoalternativesproposedabove,andtoenablethedirectorsofGonzalesto decide which alternative is favoured,in word format, you are required toprovide management with an analysis and assessment of any other factors that should be taken into accountwhen advising the directors of Gonzales with regard to these two alternatives.
(Weight 25%) (Total Marks: 10)
