Sensitivity Analysis and Decision Making. Performance Sports produces inflatable rafts used for river rafting. Sales have grown slowly over the years, and cost increases are causing Performance Sports to incur losses. Financial data for the most recent year are shown.
Members of the management group at Performance Sports arrived at these three possible courses of action to return the company to profitability (each scenario is independent of the others):
1. Increase the sales price for each raft by 10 percent, which will cause a 5 percent drop in sales volume. Although sales volume will drop 5 percent, the group believes the increased sales price will more than offset the drop in rafts sold.
2. Decrease the sales price for each raft by 10 percent, which will cause an 8 percent increase in sales volume. Although the sales price will drop by 10 percent, the group believes an increase in rafts sold will more than offset the sales price reduction.
3. Increase advertising costs by $200,000, which will increase sales volume by 15 percent. Although fixed selling and administrative costs will increase by $200,000, the group believes the increase in rafts sold will more than offset the increase in advertising costs.
a. Calculate the projected operating profit (loss) for the option assigned, and determine whether the option is acceptable.
b. Discuss and document the advantages and disadvantages of the option assigned.
c. Discuss which option in the best.
Answer:
Sensitivity Analysis and Decision Making. Performance Sports produces inflatable rafts used for river rafting. Sales have...
Use Excel to complete this exam. Use one spreadsheet with tabs for each question. Label the tabs as "Question 1," "Question 2, etc. Submit your completed spreadsheet in the appropriate D2L Dropbox by Friday, November 15, 2019. Each question is worth 25 points. 1. Using the information in Cases 6-61 and 6-60 (given below) construct an Excel spreadsheet to compute the operating profit (loss) for the base case and each of the three alternatives.. 6-61 Sensitivity Analysis Using Excel. Refer...
Problem set Ross Pro’s Sports Equipment began business in 2019, and its sales in 2019 were 4,800 units of sports equipment. The selling price per unit was $300. Variable cost per unit of sports equipment was $186. Annual fixed costs were $446,400. 1. Please use the format of a contribution margin income statement to calculate the contribution margin (in dollars), unit contribution, and contribution margin ratio for Ross Pro’s Sports Equipment. Part 1 Total Per unit Percentage Sales (4,800 units)...
Sports Drinks, Inc. began business in 2018 selling bottles of a thirst-quenching drink. Sales in 2018 were 99,000 bottles. The selling price per bottle was $3.10. Variable cost per bottle was $1.35. Annual fixed costs were $63,200. 1. Please use the format of a contribution margin income statement to calculate the contribution margin (in dollars), unit contribution, and contribution margin ratio for Sports Drinks. You can refer to Example 1 in the textbook. Total Per Unit Percentage Sales (xxx units)...
ThreePoint Sports Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6 months of 2020, the company reported the following operating results while operating at 80% of plant capacity and producing 120,100 units. Amount Sales $4,804,000 Cost of goods sold 3,503,718 Selling and administrative expenses 447,783 Net income $852,499 Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $228,000. In July, normally a slack manufacturing month, ThreePoint Sports receives...
LA’s Sports Equipment began business in 2019, and its sales in 2019 were 4,800 units of sports equipment. The selling price per unit was $300. Variable cost per unit of sports equipment was $186. Annual fixed costs were $446,400. 1. Please use the format of a contribution margin income statement to calculate the contribution margin (in dollars), unit contribution, and contribution margin ratio for LA’s Sports Equipment. Total Per Unit Percentage Sales (xxx units), Less: Variable costs, Contribution margin, Less:...
Problem 18-6A Analysis of price, cost, and volume changes for contribution margin and net income P2 @ A1 This year Burchard Company sold 40,000 units of its only product for $25 per unit. Manufacturing and selling the product required $200,000 of fixed manufacturing costs and $325,000 of fixed selling and administrative costs. Its per unit variable costs follow. Material Direct labor (paid on the basis of completed units) Variable overhead costs Variable selling and administrative costs $8.00 5.00 1.00 Next...
ThreePoint Sports Inc. manufactures basketballs for the Women’s
National Basketball Association (WNBA). For the first 6 months of
2020, the company reported the following operating results while
operating at 80% of plant capacity and producing 118,700 units.
Amount
Sales
$4,748,000
Cost of goods sold
3,582,083
Selling and administrative expenses
503,262
Net income
$662,655
Fixed costs for the period were cost of goods sold $960,000, and
selling and administrative expenses $235,000.
In July, normally a slack manufacturing month, ThreePoint Sports
receives...
ThreePoint Sports Inc. manufactures basketballs for the Women's National Basketball Association (WNBA). For the first 6 months of 2017, the company reported the following operating results w operating at 80% of plant capacity and producing 119,400 units. Amount Sales Cost of goods sold Selling and administrative expenses Net income s 4,656,600 3,684,708 526,292 $445,600 Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $266,000 In July, normally a slack manufacturing month, ThreePoint Sports...
ThreePoint Sports Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6 months of 2020, the company reported the following operating results while operating at 80% of plant capacity and producing 119,900 units. Amount Sales $4,676,100 Cost of goods sold 3,527,059 Selling and administrative expenses 482,601 Net income $666,440 Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $244,000. In July, normally a slack manufacturing month, ThreePoint Sports receives...
ThreePoint Sports Inc. manufactures basketballs for the Women's National Basketball Association (WNBA). For the first 6 months of 2020, the company reported the following operating results while operating at 80% of plant capacity and producing 119,100 units. Sales Cost of goods sold Selling and administrative expenses Net income Amount $4,525,800 3,519,459 412,841 $593,500 Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $233,000. In July, normally a slack manufacturing month, ThreePoint Sports receives...