1.) There are many opportunities to use C-V-P analysis in business world. How have you used C-V-P analysis in your current position or some prior position that you held? You are not being asked to provide any calculations. instead, you are to share what types of business decisions you are /were trying to make. Be specific enough so that we can understand how you applied C-V-P or can apply C-V-P in the future. If you do not have work experience to draw upon, then answer these questions based on your understanding of the concepts. Please post your answers to this discussion board by Sunday , February 26, 2017. (I am in the IT field, just use an example in that industry)
2.) Cost-Volume-Profit Analysis
Demonstration Problem
Trimble Company sells an electronic toy for $40. The variable cost is $24 per unit and the fixed cost is $32,000 per year. Management is considering the following changes:
Alternative #1 Lease a new packaging machine for $4,000 per year, which will reduce variable cost by $1 per unit.
Alternative #2 Increase selling price 10 percent to counteract an expected 25 percent increase in fixed cost.
Alternative #3 Reduce fixed cost by 25 percent by moving to a lower rent location. This would have the effect of increasing variable costs by 10 percent.
Required:
Consider and answer each of the following questions independently:
Round calculations to the nearest unit
(a) Determine the current break-even point in units and dollars.
(b) Determine the expected profit assuming alternative #1 and sales of 3,200 units.
(c) Determine the break-even point in units and dollars assuming alternative #2.
(d) Determine the break-even point required in units and dollars assuming alternative #3.
(e) Determine the volume of sales required to earn $23,600 assuming alternative#3.
3.) Operating Leverage is discussed on page 909 in your textbook. Operating leverage refers to the extent to which a company uses fixed costs in its cost structure. If a company has a relatively high proportion of fixed costs relative to its variable costs, then it has the potential for generating large percentage increase in net income from a relatively small increase in sales revenue. Take a look at Exercise #21-24 on page 920 and 921 in your textbook and the solution which is posted under Course Contents for Week #8 Chapter 21. Please answer the following questions and post them to this discussion board by Sunday, February 26, at 10 p.m.
1. In your words, describe operating leverage and how it might be useful to you.
2. How would you describe the operating leverage of your current or previous employer? If you do not have work experience to draw upon, then answer this question in terms of a particular industry, e.g., banking, manufacturing, health-care, education, government, etc.
3. If you were to go into your own business, what mix of fixed and variable costs do you think you would prefer? Why?