Question

Prepare a Graph and Derive Information from the Graph

BASELINE CASE
The following numbers are estimates for the upcoming year for a manufacturing company.
Since the company is effective at implementing a JIT inventory system, assume there is
no beginning or ending inventory.
No. of units sold	120,000
Selling price per unit	$240.00
	Fixed Expenses	Variable Expenses         (per unit sold
Production costs:
Direct materials		$18.00
Direct labor		36.00
Factory overhead	$2,160,000	24.00
Marketing expenses:
Sales salaries and commissions	540,000	7.50
Advertising	360,000
Miscellaneous mktg. expenses	108,000
Administration expenses:
Office salaries	720,000
Supplies	105,000	1.50
Miscellaneous admin. expenses	72,000
TOTAL EXPENSES	$4,065,000	$87.00
Contribution Margin Income Statement
Sales Revenues (120,000 Units at $240)		$28,800,000.00
Variable Costs:
Direct Materials (120,000 Units at $18)	$2,160,000
Direct Labor (120,000 Units at $36)	$4,320,000
Variable factory Overhead (120,000 x $24)	$2,880,000
Variable selling expenses (120,000 x 7.50)	$900,000
Variable Adminstrative Expenses (120,000 x 1.50)	$180,000
Total Variable Cost		$10,440,000.00
Contribution Margin (Sales - Total Variable Cost)		$18,360,000.00
Total Fixed Costs		$4,065,000.00
Operating Income		$14,295,000.00
Contribution Margin Per Unit (B11 - C26)
=Unit selling price – Unit total variable cost
=$240 - $87
=$153 per unit
Contribution Margin Percentage (A46 / B11 * 100)
=Unit Contribution Margin / Unit Selling Price * 100
=$153 / $240 * 100
=63.75%
Breakeven Point in Units (C40 / A51)
=Total Fixed Costs / Contribution Percentage
=$4,065,000 / 63.75%
=$6,376,471

Prepare a cost-volume-profit (CVP) graph using only the baseline case. Below are some instructions for creating a graph.  

You need to first prepare a table with your data so that you can instruct Excel to graph the table. You will need the following columns: Units, Revenue, Fixed Costs, and Total Costs. In Excel, the type of chart you need to select is the “scatter.” This makes both axes what Excel calls “value” axes. Since both x and y axes have values, you will be able to control the tick marks on both axes. The graph should be readable and easy to interpret. For example, showing the number of units on the graph in increments of 100,000 does not give enough detail. Showing the number of units in increments of 100 gives too much detail.

Write a memo stating at least three pieces of information you can derive from reading the graph. For example, one item of information could be that if the manufacturing company sells 20,000 units, the revenue is approximately $_____.