Case 1: BEP and CVP Analysis Mankato, Inc. produces and sells computer cases to its customers. The selling price is $20.00 per unit regardless the model or color. You have been hired as a consultant to give advise to the top management. The product is very popular, so the company always sell all units it produces. Unit sales and total production, selling and administrative, and general and administrative costs for 2021 and 2022 (partial) follow:

	Month	Unit Produced and Sold (X)	Total Costs (Y)
2022	January	2,200.00	$ 36,400.00
	February	1,650.00	$ 29,800.00
	March	1,300.00	$ 25,600.00
	April	2,300.00	$ 37,600.00
	May	1,950.00	$ 33,400.00
	June	2,000.00	$ 34,000.00
	July	1,300.00	$ 25,600.00
	August	1,600.00	$ 29,200.00
	September	1,900.00	$ 32,800.00
	October	1,500.00	$ 28,000.00
	November	2,100.00	$ 35,200.00
	December	1,700.00	$ 30,400.00
2023	January	1,900.00	$ 32,800.00
	February	2,100.00	$ 35,200.00
	March	2,100.00	$ 35,200.00
	April	2,200.00	$ 36,400.00
	May	2,250.00	$ 37,000.00
	June	2,200.00	$ 36,400.00
	July	2,100.00	$ 35,200.00
	August	2,450.00	$ 39,400.00
	September	2,300.00	$ 37,600.00
	October	2,400.00	$ 38,800.00

	Required:			Calculation	Analysis
1	Using regression, determine variable costs per unit and monthly and annual total fixed costs.		10.00%
	Analize the chart and the reliability of the regressionin the Regression tab.			5.00%
2	Determine the monthly and annual cost function.			5.00%
3	Calculate the unit and Sales Revenue Break Even Point.			7.50%
4	Forecast the 2024 Income Statement if the company predicts 25,000 units to be produced		5.00%
	and sold in 2024.
5	Analyze the followings if the forecast is true:
	a.	Dollar and Percentage Margin of Safety in 2024. Explain what the numbers mean.		5.00%	2.50%
	b.	Degree of Operating Leverage in 2014. Explain what the number means.		5.00%	2.50%
6	The managers come with three independent proposals for 2024 and ask you to make recommendations.
	Compare the proposals to the 2024 original forecast. Which proposal would you recommend?
	P1	A market analysis forecasts that a 10% reduction in selling price, combined with an increase of $2,000 in		12.50%	5.00%
		the monthly advertising (FC) budget, will cause unit sales to increase by 1,000 units per month.
	P2	The company's marketing department thinks that a new packaging would boost monthly sales by $6,000.		12.50%	5.00%
		The new package would increase variable costs by $1.00 per unit.
	P3	An outside consultant has reported that by automating certain operations, the company can cut		12.50%	5.00%
		its variable costs per unit by 25%. However, total fixed costs will increase by $3,500 per month
		and there is a $15,000 one-time investment for the automation.

1	Price
	Variable Costs / unit
	Contribution Margin / unit
		Monthly	Annual
	Total Fixed Costs
2	Cost function
		Monthly	Annual
3	Break Even Point units
	Break Even Point Sales
4	Total revenues
	Variable Costs
	Contribution Margin
	Fixed Costs
	Net Income
		Dollar	Percentage
5a	Margin of Safety
5b	Degree of Operating Leverage
6a	Reduction in price (Percentage)		Monthly advertising (FC) increase
	Reduction in price ($)		Increase in Annual FC
	Monthly increase in unit sales		Annual increase in unit sales
	Total revenues
	Variable Costs
	Contribution Margin
	Fixed Costs
	Net Income
	New Break Even Point units
b	Increase in Variable Costs per unit
	Monthly increase in $ sales
	Monthly increase in unit sales		Annual increase in unit sales
	Total revenues
	Variable Costs
	Contribution Margin
	Fixed Costs
	Net Income
	New Break Even Point units
c	Reduction in Variable Costs per unit (%)
	New Variable Costs per unit ($)		One time investment
	Increase in monthly total Fixed Costs		Increase in Annual total Fixed Costs
	Total revenues
	Variable Costs
	Contribution Margin
	Fixed Costs
	Net Income
	New Break Even Point units