using sensitivity analysis

dependable drivers driving school charges $250 per student toprepare and administer written driving tests. variable costs of$100 per student include trainers' wages, study materials, andgasoline. annual fixed costs of $75,000 include the trainingfacility and fleet of cars.

Requirements

1. For each of the following independent situations, calculatethe contribution margin per unit and the breakeven point in unitsby first referring to the original data provided:

a. Breakeven point with no change in information.

b. decrease sales price to $220 per student

c. decrease variable costs to $50 per student

d. decrease fixed costs to $60,000.

2. compare the impact of changes in the sales price, variablecosts, and fixed costs on the contribution margin per unit and thebreakeven point in units.

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Sixta KovacekLv2

28 Sep 2019

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Related questions

Highway driving school charges $560 per student to prepare andadminister written and driving tests. Variable costs of $280 perstudent include trainers' wages, study materials, and gasoline.Annual fixed costs of $92400 include the training facility and thefleet of cars.

1. For each of the following independent situations, calculatethe contribution margin per unit and the breakeven point in unitsby first referring to the original data provided:

a. Breakeven point with no change in information

b. decrease sales price to $400 per student

c. decrease variable costs to $224 per student

d. decrease fixed costs to $81200

2. Compare the impact of changes in the sales price, variablecosts, and fixed costs on the contribution margin per unit and thebreakeven point in units.

reddinosaur30

The project requires the comparison of two competing proposals. Only one will be selected. The details of the proposals are as follows:

1. The Production Manager wants to invest $250,000 into new manufacturing equipment that will improve the efficiency and quality of the production process. The production manager has been pushing for this investment for months and has stated that the variable manufacturing cost of the product will decrease by $10 per unit. The investment will cause an increase in the fixed manufacturing costs in the form of annual depreciation expense of $50,000 on the new equipment.
The accounting numbers are as follows:
i. Decrease in Variable cost of $10 per unit
ii. Increase to annual Fixed cost of $50,000

2. The Sales Manager wants to implement a 3 year marketing campaign at a total cost of $150,000 ($50,000 annually for 3 years) and to decrease the selling price of the product by $13 dollars. He guarantees this will increase sales units by 25%.
The accounting numbers are as follows:
i. Decrease in Selling price per unit of $13
ii. Increase in annual marketing expense (fixed cost) of $50,000
iii. Increase in sales units by 25% (at the new lower per unit selling price)

You will need to complete a Contribution Margin Report based on the current revenue and expenses and also one for each of the proposals. In addition to the Contribution Margin Report you will also need to include the following calculations for the current and for each of the proposals: The Breakeven point in sales units and dollars, the margin of safety in dollars and percentage. For the analysis of the two proposals ignore the net present value of cash flows.
After you have completed your analysis you will need to make your recommendation on the course of action that will be the most advantageous to the company. Be complete in your analysis and prepare a memo to your boss Sally outlining your findings and provide support for your recommendation. [Be sure to include âallâ of the information that the data is providing.]

Student Name:

Manning Enterprises

Set up a Contribution Margin Statement for Product A to use for your analysis

You gathered the following per unit information from the Company's accounting system for Product A:

Unit Sales 5,344
Sales Price per Unit $225.00
Variable Cost per unit $137.00
Total Traceable Fixed Cost $357,245.00

Using the above data prepare a current contribution margin report and a Forecasted contribution margin report (one for each of the proposals reflecting each of their proposed changes). You use a template that you kept from when you took Managerial Accounting . You saved all of the templates you used in Managerial Accounting because you knew someday you would need them!

Production Propsal

Current Per Unit % of Sales Current Proposed per Unit % of Sales Forecasted based on Proposal Difference

Units Sold
Sales

Variable Cost

Contribution Margin

Traceable Fixed Cost
Profit (Loss)

Sales Proposal

Current Per Unit % of Sales Current Proposed per Unit % of Sales Forecasted based on Proposal Difference
Units Sold
Sales
Variable Cost
Contribution Margin

Traceable Fixed Cost
Profit (Loss)

Current

Breakeven in Sales Units ______
Breakeven in Sales Dollars ______
Margin of Safety in sales dollars _____
Margin of Safety %

Production Propsal

Breakeven in Sales Units _______
Breakeven in Sales Dollars _____
Margin of Safety in sales dollars ______
Margin of Safety %

Sales Proposal

Breakeven in Sales Units ______
Breakeven in Sales Dollars _____
Margin of Safety in sales dollars ______
Margin of Safety % ______

yellowherring775

If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:

a. increase.

b. remain the same.

c. decrease.

d. increase or decrease, depending upon the percentage increase in wage rates.

Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are:

a. 53% and $7 per unit.

b. 47% and $11 per unit.

c. 52% and $11 per unit.

d. 47% and $8 per unit.

If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?

a. 0

b. 1.3

c. 3.1

d. 1.25

Which of the following describes the behavior of the fixed cost per unit?

a. Increases with increasing production

b. Remains constant with changes in production