----------ANSWER ENTIRE PROBLEM PLEASE-----------

Assume you are the Controller for Gawronski Home Renovation Superstore. Gawronski sells products to many people remodeling their homes. The marketing team thinks that Gawronski could profitably offer courses on tile installation, which might also increase the demand for their products.

You have asked your Staff Accountant to work with the marketing team to gather cost data on this new idea. Your Staff Accountant has determined that the basic installation course has the following (tentative) price and cost characteristics:

Tuition..........................................................................$800 per student

Variable costs (tiles, supplies, and so on)...................$480 per student

Fixed costs (advertising, salaries, and so on)............160,000 per year

The CFO has asked you to prepare an analysis on the proposed basic installation course. You determine the following items must be discussed:

1.) What enrollment (how many students) will be required for Gawronski to break even?

2.) How many students must enroll in order for Gawronski to make an operating profit of $80,000 on the basic installation course?

3.) Prepare a Cost-Volume-Profit graph that illustrates items 1. and 2. above.

4.) The marketing team thinks it is likely to expect 800 students to enroll. Given this assumption, you need to prepare a scenario analysis for the CEO showing:

1.) What the operating profit will be given the above data.

2.) What would be the operating profit if the tuition per student (that is, sales price) decreased by 10 percent?

3.) What would be the operating profit if the tuition per student increased by 20 percent?

4.) What would be the operating profit if variable costs per student decreased by 10 percent?

5.) What would be the operating profit if variable costs per student increased by 20 percent?

6.) What would be the operating profit if fixed costs for the year are 10 percent lower than projected, whereas variable costs per student are 10 percent higher than projected?

7.) What would be the operating profit if only 450 students enrolled?

Utilize Microsoft Word to prepare a report for the CFO that encompasses all of the items above. Use Microsoft Excel to calculate all data and prepare all charts and graphs. Paste the charts and graphs into your report where appropriate.

Conclude with a recommendation on whether or not you think Gawronski should offer the basic installation course. Provide details to support your conclusion. Provide a thorough analysis of the pros and cons / risks and rewards. What other factors should the CFO consider in this decision?