Business Description

The Stackpole Company retails two products, a standard and deluxe version of a luggage carrier.

The standard carrier sells for $38, has variable costs of $23, and direct fixed costs of $8000,000. The deluxe model sells for $56, has variable costs of $34, and direct fixed costs of $1,500,000. The company has common fixed costs of $250,000. The anticipated sales mix for the company is 4:1 or 80/20. The actual level of sales units currently is 250,000 (total for both products) and your target income is $1,250,000. You expect sales to rise 10% in the coming year.

Directions:

You have been hired to build a CVP model to help the company understand the impact of business conditions on operating income. Your model should include breakeven in units with a pro forma income statement, units sales for a target income of $1,250,000 with a pro forma income statement, an income statement reflecting actual current sales, margin of safety in dollars and %, and degree of operating leverage. Your model should have the capability of computing B/E, target income, MOS, DOL, and predicting change in income based on a change in sales. Create a dashboard to show the these variables.

Once you have built the model, use the model to determine changes to the dashboard variables. In a report to me, your CEO, show the original variables, the changed variables and explain why the change occurred.

1. Sales mix changes to 30/70
2. Common fixed costs increase by $100,000
3. Increase VC of the standard carrier by $8 per unit