Build an Excel spreadsheet to set up a spreadsheet like the one in Exhibit 13-3 and make individual changes except for requirement (e). Indicate how each affects the choice between methods. Make each of the following changes independently of the others except for requirement (e).

a. Expected market price is raised to $120.

Unit-level costs: alternative 1 = $25, alternative 2 = $45.

Equipment costs: alternative 1 = $150,000, alternative 2 = $30,000.

Expected sales volume is increased by 20 percent.

Combine the conditions of (a)—

(d) and compute the alternatives’ returns on sales.

&>o aTenam Focus: Assume that you are the cost-management member of the target-costing team. Your natural tendency is to be skeptical of expected increases in sales prices and reductions in costs, and the marketing member of the team has jokingly referred to you as the “grim reaper.” (Accountants call this tendency “conservatism.”) Learning how to temper marketing and engineering team members’ natural optimism with “financial reality” without losing credibility and influence is an important lesson for cost-management analysts. What questions should you ask about the preceding alternatives for the analysis?