Bennis Shafts produces three types of golf club shafts which it sells to golf club manufacturers. Prepare ONE worksheet to answer the following questions and to determine the outcomes of the different scenarios below.
Instructions:
1. Read all instructions and information carefully.
2. Prepare one spreadsheet that can be used to evaluate each of these scenarios. Your spreadsheet should be neatly organized and easy to read. Include dollar signs as appropriate, but not in every cell. You should clearly identify the input section (this should include all of the given information) and separate it from the computation section. All parameter changes should be in the input section.
3. No numbers should be typed in the computation section of your spreadsheet except for the number 1 if necessary for change calculations. The spreadsheet should automatically and correctly update when input information is changed. You may add information to the input section of your spreadsheet as needed. With the exception of breakeven quantities, do not use the rounding function, but only show 2 decimal places. For breakeven quantities, use the roundup function in Excel to round up the breakeven quantity of each type of shaft. Do not round up the total number of units needed to breakeven. This is the rounding function to use: =ROUNDUP(CELL1*CELL2,0). CELL1*CELL2 = the formula entered into the cell and the 0 means to round up to a whole number.
4. The computation section of your spreadsheet should have two sections:
Section A.
Answer the following questions based on the information as given:
1) What is the sales mix?
2) What is the contribution margin per unit for each type of shaft?
3) What is the weighted average unit contribution margin for this mix of shafts (show both the CMU method and the total CM method)
4) How many of each type of shaft must Bennis sell to breakeven?
5) Given the limited production time, which type of shaft is most profitable?
Section B.
Prepare a variable costing income statement for each scenario below. The assumptions/changes for each scenario should be shown in the input section and clearly labeled for that scenario. The changes in scenarios 2, 3 and 4 are based on scenario 1 which is the information as given. This means that all items should be at the values used in scenario 1 except the item(s) that are indicated to change for that particular scenario. Prepare and clearly label a separate income statement for each scenario.
5. Prepare a Word document with a short memo (1/2 page single spaced) to Bennis Shafts management explaining the effects of scenarios 2, 3 and 4 on their operating income compared to scenario 1. Please be clear but concise.
Scenario 1 - Bennis sells shafts in the quantities, prices and costs as indicated in the given information.
Scenario 2 - Due to a decrease in orders by 10%, management attempts to compensate for lower sales by increasing all prices by 10%.
Scenario 3 - Bennis hires a new production supervisor at $50,000 in response to an increase in orders of 10%.
Scenario 4 - Bennis changes its sales mix to Steel - 20%, Titanium - 60% and Beryllium - 20% while producing the same total number of golf club shafts.
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Steel
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Titanium
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Beryllium
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Total
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Number of sets
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6000
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2000
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1000
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Price per set
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$120.00
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$150.00
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$192.00
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|
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Direct material per set
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$18.00
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$33.00
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$42.00
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|
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Direct labor per set
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$12.00
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$12.00
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$12.00
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Time to produce each shaft
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0.5
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0.4
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0.7
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Fixed costs
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|
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$300,000
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Excel Spreadsheet
1. Using the following information, perform a sensitivity analysis and indicate to which variable would have the greatest effect on operating income. Present the complete table.
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Base
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High
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Low
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Quantity Produced
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6,000
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7,000
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5,000
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Price
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$120.00
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$130.00
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$80.00
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DM
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$18.00
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$25.00
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$12.00
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DL
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$12.00
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$30.00
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$7.25
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FC
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$ 20,000.00
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$ 23,000.00
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$ 15,000.00
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