CBH Company sells bicycles that they buy from various manufacturers. They are in the process of prepare a Master Budget including the Sales Budget, The Purchasing Budget, the Cash Budget and the Income Statement for 2022. The yearly budget is broken into quarters. The year end is December 31st.

22 Requirement B: Your group has been requested to complete the following CVP analysis for fiscal 2022. Use the CVP Analysis Tab to complete this analysis. Ignore interest expense for this section. 1. What is the breakeven point in units sold? What is the breakeven point in sales dollars? 2. How many units need to be sold to earn an aftertax profit of . Assume a tax rate of 30% 3. What is the margin of safety in $ ? 4. If sales were to increase by 15% in 2023 from 2022 projected levels and expense behaviour remains the same for 2023 as in 2022 , how much will net income before tax and interest increase by as a percentage. Use operating leverage to answer this. 5. If CBH spend $50,000 on advertising campaign, it believes sales (units) will increas without any change in average selling price. Should it take on the advertising? Why or why not? 4 37 Additional details: Below you will see yellow data bowes labeled with the letters A through M. Your instructor will provide your group with the data to enter into these bowes. This data set is unique to your group, so make sure you enter the data correctly. - Average estimated selling price per electric bike is $575 - There are 1,200 bicycles in Bike Irventary at the end of 2021 with a value af $280,000233 buying price At the end of each quarter, CBH Campany wishes to have 60% of next quarters estimated sales - For each quarter, it is estimated that 75% of sales will be cash and 425% will be credit sales. Of the credit sales, 80% pay in the quarter of the sale and 2005 pay in the fallawing quarter. Credit sales fram Q4 2021 were $430,000 - Assume operating expenses accur evenly throughout the year and are all paid in cash. - For each quarter, the purchase and Q4 2021 were \begin{tabular}{|r|} \hline 709 \\ \hline 309 \\ \hline$510,000 \\ \hline$60,000 \\ \hline \end{tabular} of Bike purchases are paid for in cash in the quarter of - CBH Campany will pay are paid in the follawing quarter. Total bike purchases in minimum cash balance of $10,000 in the bank for each quarter. - Budgeted 2022 sales volurres in umits for each puarter are: - Selling and Administration expenses for the budgeted year are as follows; Sales Wages: Sales wages are a mixed cost (salary and commissions). CaH Company plans on estimating these casts for 2022 based on actual historical data using the highi-low method. Here are the total sales in units and the total sales wages expense for the last 4 years. \begin{tabular}{|r|r|c|} \hline & Units sald & \multicolumn{1}{|c|}{$} \\ \hline 2021 & 12585 & 145130 \\ \hline 2020 & 12905 & 164975 \\ \hline 2019 & 11385 & 174225 \\ \hline 2018 & 8175 & 137145 \\ \hline \end{tabular} - CBH Company will purchase a new store on 1/1/2022 worth $500,000 to be be paid for in 2 equal payments. The first payment will be in Q1 and the second in Q3. - Taxation is 30 \% on taxable income and paid at the end of Q4 each year. - For Cost of Sales (COS); Add total purchases + Beginning Bike Inventory - Ending Bike Inventory. - Interest expense for a quarter is calculated based on the loan balance at the end of the previous quarter and is calculated based on an annual rate of The loan balance at the end of 2021 was \begin{tabular}{|rr|} \hline & 5.00% \\ \hline$ & 78,000 \\ \hline \end{tabular} 22 Requirement B: Your group has been requested to complete the following CVP analysis for fiscal 2022. Use the CVP Analysis Tab to complete this analysis. Ignore interest expense for this section. 1. What is the breakeven point in units sold? What is the breakeven point in sales dollars? 2. How many units need to be sold to earn an aftertax profit of . Assume a tax rate of 30% 3. What is the margin of safety in $ ? 4. If sales were to increase by 15% in 2023 from 2022 projected levels and expense behaviour remains the same for 2023 as in 2022 , how much will net income before tax and interest increase by as a percentage. Use operating leverage to answer this. 5. If CBH spend $50,000 on advertising campaign, it believes sales (units) will increas without any change in average selling price. Should it take on the advertising? Why or why not? 4 37 Additional details: Below you will see yellow data bowes labeled with the letters A through M. Your instructor will provide your group with the data to enter into these bowes. This data set is unique to your group, so make sure you enter the data correctly. - Average estimated selling price per electric bike is $575 - There are 1,200 bicycles in Bike Irventary at the end of 2021 with a value af $280,000233 buying price At the end of each quarter, CBH Campany wishes to have 60% of next quarters estimated sales - For each quarter, it is estimated that 75% of sales will be cash and 425% will be credit sales. Of the credit sales, 80% pay in the quarter of the sale and 2005 pay in the fallawing quarter. Credit sales fram Q4 2021 were $430,000 - Assume operating expenses accur evenly throughout the year and are all paid in cash. - For each quarter, the purchase and Q4 2021 were \begin{tabular}{|r|} \hline 709 \\ \hline 309 \\ \hline$510,000 \\ \hline$60,000 \\ \hline \end{tabular} of Bike purchases are paid for in cash in the quarter of - CBH Campany will pay are paid in the follawing quarter. Total bike purchases in minimum cash balance of $10,000 in the bank for each quarter. - Budgeted 2022 sales volurres in umits for each puarter are: - Selling and Administration expenses for the budgeted year are as follows; Sales Wages: Sales wages are a mixed cost (salary and commissions). CaH Company plans on estimating these casts for 2022 based on actual historical data using the highi-low method. Here are the total sales in units and the total sales wages expense for the last 4 years. \begin{tabular}{|r|r|c|} \hline & Units sald & \multicolumn{1}{|c|}{$} \\ \hline 2021 & 12585 & 145130 \\ \hline 2020 & 12905 & 164975 \\ \hline 2019 & 11385 & 174225 \\ \hline 2018 & 8175 & 137145 \\ \hline \end{tabular} - CBH Company will purchase a new store on 1/1/2022 worth $500,000 to be be paid for in 2 equal payments. The first payment will be in Q1 and the second in Q3. - Taxation is 30 \% on taxable income and paid at the end of Q4 each year. - For Cost of Sales (COS); Add total purchases + Beginning Bike Inventory - Ending Bike Inventory. - Interest expense for a quarter is calculated based on the loan balance at the end of the previous quarter and is calculated based on an annual rate of The loan balance at the end of 2021 was \begin{tabular}{|rr|} \hline & 5.00% \\ \hline$ & 78,000 \\ \hline \end{tabular}