Cost-volume-profit analysing current situation Custom Essay
Practical computer based workshop session using spreadsheets to answer ‘what if?’ situations using CVP analysis.
ALL CALCULATIONS ARE READY IN A EXCEL DOCUMENT, ONLY COMMENT NEEDED
Current situation
The selling price is £15.00, with a variable cost per unit sold of £10.50. The expected number of units sold is 350,000. Fixed costs are currently £700,000.
Option 1
This option is an expansion of the operation, which allows the volume of sales to be increased, but additional fixed costs are incurred. The selling price remains at £15.00 and the variable costs at £10.50, however the volume of sales will increase to 430,000 and the fixed costs would be £950,000.
Option 2
This is an adaptation of the product, making a cheaper alternative product for the market. The selling price would drop to £12; the variable costs are £7. The number of customers will increase to 490,000, with the fixed costs at £950,000.
Option 3
This is an adaptation of the product, making a superior quality product for the market. The selling price would increase to £20 and the variable costs would increase to £15.5. The number of customers would decrease to 270,000 and fixed costs would remain at £700,000.
Completed spreadsheet is in a file- showing the current situation and alternatives with breakeven chart in Excel – illustrate the current situation.
!! Make only written comment concerning the alternatives and your recommendations to the manager.!!
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