Objectives:

To improve your quantitative skills by completing a CVP analysis using statistics and Excel

To improve your critical$-$thinking and communication skills by writing a memo that clearly and logically makes a

recommendation based on your spreadsheet analysis

The upper management team at Davy Company has decided to introduce a new product. CEO David Christensen is

trying to decide between capital$-$intensive and labor$-$intensive manufacturing methods. The CEO asks for your

recommendation. You collect the relevant estimated costs of each method. The manufacturing method will not affect

the quality of the product, and Marketing Research recommends a unit sales price of $$110\mathrm{.}00.$

Required:

Using Excel, calculate the estimated break$-$even point $($in units$)$ for the new product for each method.

Using Excel, calculate the indifference point $($in units$)$ where the operating incomes of the two methods are

equal.

Based on historical data from a similar product, the number of units to be sold is a normally distributed random

variable with a mean of $300,000$ and a standard deviation of $100,000$ units. Using this information and Excel's

formula, $=1-$NORMSDIST$(z),$ calculate the probability that the level of sales will exceed the indifference point.

Note: Indifference Point from Part $1-$ Mean of X$)\frac{?}{?}$ Standard Deviation of X$.$