Cost & Value Driver Problems

CALCULATION PROBLEM

Based on the following information, complete the problems listed below on the Osprey Helicopters Company.

Baseline Financial Results [In $ Dollars 000]

Sales...$75,000

Basic Manufacturing Costs$30,000

General & Administrative Expense..$12,000

# Units shipped...15

Your task is to create a set of pro-forma forecasts based on the following baseline assumptions on key business drivers and specific assumptions for each of the two scenarios.

For the Baseline results shown above, the assumptions are (1) Basic Mfr. Costs and General & Administrative Expenses arising from the summary financial data above are treated as Fixed Costs, and (2) Contribution Margin Percentage is 60%. Helpful hint when doing scenario analysis: start by calculating the operating profit [and its underlying cost structure] arising from the information provided above. Complete Scenario 2

Scenario 2: Assume Osprey keeps the shipment level at 15 units, but increases the average selling price per unit by 10%.

What will be the pro-forma operating income?