• Analyze the impact of the increase in sales over the next year. eCar expects that automobile sales will increase significantly over the next year. During the year covered by the data in Exhibit $1\mathrm{.}6,$ eCar produced and delivered about $370,000$ cars. eCar expects that sales will increase to about $450,000$ cars next year.
•  Consider the following questions related to the impact of this increase in sales
• .a$.$Using your spreadsheet, calculate the average revenue $($sales price$)$ and cost of each car produced last year. Base the cost estimate on the automotive sales COGS $($this reflects the variable cost for each car$)$

  $.$b$.$Assume that the relationships between average revenue and cost stay the same next year $($revenue$/$car and variable cost$/$car stay the same$)$ and that nothing else changes in the financials. If sales do improve to $450,000$ cars, what would be the expected profit margin, asset turnover, and return on assets if it were possible for the company to do this?

  c$.$What questions might you explore with management to evaluate the assumptions that were made in your calculations?Current Yearly Financials $($$millions$)$ for eCar

  

  
  

  
  

  
  
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exhibit 1.6 Current Yearly Financials (Smillions) for eCar Annual Sales Automobile sales Automotive leasing Total automotive sales Services and other Total sales Cost of Goods Sold (COGS) Automotive sales Automotive leasing Total automotive COGS Services and other Total COGS Other Costs Research and development Selling, general and administrative Restructuring and other Total other costs Current Assets Inventory Receivables Cash Total current assets Fixed Assets Property, plant, and equipment Other Total fixed assets $19,952 869 20,821 3,226 $24,578 $15,939 459 $16,398 2,770 $20,509 $1,343 2,646 149 $4,138 $ 3,552 1,324 7,227 $12,103 $10,396 11,810 $22,206 exhibit 1.6 Current Yearly Financials (Smillions) for eCar Annual Sales Automobile sales Automotive leasing Total automotive sales Services and other Total sales Cost of Goods Sold (COGS) Automotive sales Automotive leasing Total automotive COGS Services and other Total COGS Other Costs Research and development Selling, general and administrative Restructuring and other Total other costs Current Assets Inventory Receivables Cash Total current assets Fixed Assets Property, plant, and equipment Other Total fixed assets $19,952 869 20,821 3,226 $24,578 $15,939 459 $16,398 2,770 $20,509 $1,343 2,646 149 $4,138 $ 3,552 1,324 7,227 $12,103 $10,396 11,810 $22,206

Answer rating: 100% (QA)

Okay lets calculate the expected profit margin asset turnover and return on assets if eCars sales in... View the full answer