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This Paper contains solution to all calculation part only (No Memo)
Week Five Individual Assignment
Purpose of Assignment
The Case Study focuses on CVP (Cost-Volume-Profit), break-even, and
margin of safety analyses which allows students to experience working
through a business scenario and applying these tools in managerial
decision making.
Assignment Steps
Resources: Generally Accepted Accounting Principles (GAAP), U.S.
Securities and Exchange Commission (SEC)
Tutorial help on Excel ® and Word functions can be found on the
Microsoft ® Office website. There are also additional tutorials via the
web offering support for Office products.
Scenario: Mary Willis is the advertising manager for Bargain Shoe
Store. She is currently working on a major promotional campaign. Her
ideas include the installation of a new lighting system and increased
display space that will add $24,000 in fixed costs to the $270,000 in
fixed costs currently spent. In addition, Mary is proposing a 5% price
decrease ($40 to $38) will produce a 20% increase in sales volume
(20,000 to 24,000). Variable costs will remain at $24 per pair of shoes.
Management is impressed with Mary's ideas but concerned about the
effects these changes will have on the break-even point and the margin
of safety.
Complete the following:
· Compute the current break-even point in units, and compare it
to the break-even point in units if Mary's ideas are used.
· Compute the margin of safety ratio for current operations and
after Mary's changes are introduced (Round to nearest full
percent).