Question

Please help with this problem.
Solution: Show your your analysis in organized schedules as much as possible. A schedule for completing Requirement #1 is provided for you. Be sure to properly link cells and use formulas where applicable. Requirement 1: Scenario 1 Scenario 2 Scenario 3 Current Year $35.00 43,000 4 Problem B (26 points): 5 Block Ltd makes BLOCKS. Their pre-tax income and their margin of safety have both been low 6 compared to the levels the company would like to achieve. Consequently, they asked their 7 employees to do some research and come up with suggestions that would result in increases of 8 both pre-tax income and their margin of safety over the next year. The current pricing structure 9 consists of the following data points: 10 Selling price $35.00 Unit volume 43,000 Variable costs per unit: Material $9.60 Direct labor $5.80 Overhead $0.62 Packaging $0.95 Fixed costs: Manufacturing $ 290,000 Selling and administrative $ 354,500 Selling price Unit volume Variable costs per unit: Material Direct Labor Overhead Packaging $9.60 $5.80 $0.62 $0.95 Fixed costs: Manufacturing Selling and administrative $290,000 $354,500 Break Even Analysis: In Units In Sales Dollars 22 Three employee teams have come up with different plans to improve pre-tax income and the 23 margin of safety for next year. Respond to Required Items #1, 2, & 3 for the Current Year and for 24 each of the Three Scenarios suggested by the employee teams. Answer Required Item #4 for 25 each of the Three Scenarios and then make the decision requested in Required Item #5. 26 Problem A. Problem B. Problem C. Problem D. + Requirement 2:

Answer 1

Ans.

Ans
Particular	Current Year	Scenario 1	Scenario 2	Scenario 3
Selling Price (a)	$                35.00	$                35.00	$                37.80	$                29.75
Unit Volume (b)	43000	43000	$        40,850.00	$        58,050.00
Total Sales: c       (a*b)	$    15,05,000.0	$    15,05,000.0	$    15,44,130.0	$    17,26,987.5
Less:
Variable Costs Per unit
Material	$                     9.6	$                   7.87	$                   7.87	$                   5.90
Direct labour	$                     5.8	$                   4.93	$                   4.93	$                   4.93
Overheads	$                     0.6	$                     0.6	$                     0.6	$                     0.6
packaging	$                     1.0	$                     1.0	$                     1.0	$                   1.14
Total Variable Costs Per unit (d)	$                   17.0	$                14.37	$                14.37	$                12.59
Total Variable Costs: e    (b*d)	$       7,29,710.0	$       6,17,996.0	$       5,87,096.2	$       7,31,081.7
Total Contribution:f    (c-e)	$       7,75,290.0	$       8,87,004.0	$       9,57,033.8	$       9,95,905.8
Contribution per unit : f/b	$                18.03	$                20.63	$                23.43	$                17.16
Less:
Fixed costs:
Manufacturing	$       2,90,000.0	$       2,90,000.0	$       2,90,000.0	$       2,90,000.0
Selling & Admin	$       3,54,500.0	$       3,54,500.0	$       3,54,500.0	$       3,54,500.0
Total Fixed costs: ( g )	$       6,44,500.0	$       6,44,500.0	$       6,44,500.0	$       6,44,500.0
Net Profit : (f-g)	$       1,30,790.0	$       2,42,504.0	$       3,12,533.8	$       3,51,405.8
Break Even Analysis
In Units (Fixed cost / Contribution per unit)	35746	31244	27510	37567
In sales dollar (break even units * sales prices)	$ 12,51,110.00	$ 10,93,540.00	$ 10,39,878.00	$    9,81,452.50
Margin of safety (total sales-Break even sales)	$    2,53,890.00	$    4,11,460.00	$    5,04,252.00	$    7,45,535.00
Margin of safety % (total sales /Margin of safety)*100	$                16.87	$                27.34	$                32.66	$                43.17
Recommendation:
Company should go for "Scenario 3" which results in highest profit of $ 351405