Advanced Cost Accounting Final Project

You are contemplating starting up a new business. Before you can go to your local banker and apply for a small bus you need to do some calculations to demonstrate to the banker that you are not a risky loan applicant. The items b you project your income statement for the coming year to be, based on sales of 160,000 units.

Sales $ 2,000,000.00 Less: Variable Costs $ 1,400,000.00

Contribution Margin $ 600,000.00

Less: Fixed Costs $ 450,000.00

Operating Income. $ 150,000.00

When you met your uncle (who used to be a banker) for dinner last week, he told you some pointers that he would other patrons in a similar situation to you. The items he mentioned you need are to:

1a) Compute the unit contribution margin and the units that must be sold to break even. 1b) Suppose that 10,000 units are sold above the break-even point. What is the profit?

2a) Compute the contribution margin ratio and the break-even point in dollars. (Round your answer for the contrib 2b) Suppose that revenues are $87,5000 greater than expected. What would the profit be?

3) Compute the margin of safety in sales revenue.

4a) Compute the operating leverage 4b) Compute the new profit level if sales are 20% lower than expected.

5) How many units must be sold to earn a profit equal to 12% of sales? 6) Assuming your income tax rate is 30%. How many units must be sold to earn an after-tax profit of $180,000?

Your uncle also said that he was always more willing to lend to customers who had done their homework (i.e. the it and who appeared to have their goals in order and seem prepared, so he suggests that you also prepare a small pow presentation to go over your numbers with the banker.

Your uncle said he would review your presentation before you meet with the banker, but he's leaving on a trip tomo You told him you appreciate the help and that you will send him your final presentation next week for him to review meeting on May 9th.

REQUIRED: Using the income statement above, prepare both an excel document AND a powerpoint presentation computations for the items above. Make your case as to why you should get the aforementioned loan from the b chosen the various computations above to prepare you should projected sales not go as expected.