The following question is a Cost Volume Profit sensitivity analysis. In this question you will calculate...
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The following question is a Cost Volume Profit sensitivity analysis. In this question you will calculate and compare operating income under 3 alternatives and selecting the best alternative for the Company: The Winding River Company sells a variety of outdoor equipment and gear. During 2020, the company was to sell their high-end kayak for $1,200 each. The company was able to sell 250 kayaks. Variable costs per unit included purchasing costs of $700 and a marketing cost of $75 per unit. Fixed costs included marketing costs of $15,000 and rent of $36,000. In planning for the upcoming 2021 operating year, the Company is looking at 3 alternatives (each alternative is independent of each other) A. Increase selling prices by $150. The number of units sold is expected to decrease by 100 units. All variable and fixed costs would remain unchanged. B. New advertising campaign that would increase variable marketing costs by 4% and increased fixed marketing costs by 5%. The company estimates that unit sales would increase by 10%. C. Processing system changes that will result in a 3% increase in all variable costs and a 1% decrease in all fixed costs. Required 1. Create a table that reports the 2020 operating income and the operating income for the 3 alternatives using the contribution margin format. Ensure to report all revenues, variable costs, contribution margin, each of the fixed costs along with operating income in the table. 2. Using conditional formatting, highlight the alternative operating income(s) that fall below the operating income earned in 2020 and recommend an alternative based on your analysis. The following question is a Cost Volume Profit sensitivity analysis. In this question you will calculate and compare operating income under 3 alternatives and selecting the best alternative for the Company: The Winding River Company sells a variety of outdoor equipment and gear. During 2020, the company was to sell their high-end kayak for $1,200 each. The company was able to sell 250 kayaks. Variable costs per unit included purchasing costs of $700 and a marketing cost of $75 per unit. Fixed costs included marketing costs of $15,000 and rent of $36,000. In planning for the upcoming 2021 operating year, the Company is looking at 3 alternatives (each alternative is independent of each other) A. Increase selling prices by $150. The number of units sold is expected to decrease by 100 units. All variable and fixed costs would remain unchanged. B. New advertising campaign that would increase variable marketing costs by 4% and increased fixed marketing costs by 5%. The company estimates that unit sales would increase by 10%. C. Processing system changes that will result in a 3% increase in all variable costs and a 1% decrease in all fixed costs. Required 1. Create a table that reports the 2020 operating income and the operating income for the 3 alternatives using the contribution margin format. Ensure to report all revenues, variable costs, contribution margin, each of the fixed costs along with operating income in the table. 2. Using conditional formatting, highlight the alternative operating income(s) that fall below the operating income earned in 2020 and recommend an alternative based on your analysis.
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Ill create a table for you that reports the operating income for the three alternatives using the contribution margin format Ill also include the oper... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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