CVP Modeling project Directions The purpose of this project is to give you experience creating a multiproduct profitability analysis that can be used to determine the effects of changing business conditions on the client's financial position. Your goal will be to use Excel in such a way that any changes to the assumptions will correctly ripple through the entire profitability analysis. You have been hired by Jake to build a CVP model that will help him understand the impact of business conditions on his operating income. (See "Starting File" worksheet). In your model, all of the original assumptions will be listed in one area of the spreadsheet (green box). All other calculations in the model will reference the assumptions (green box) such that if any assumption changes, the effect will ripple through the entire model. To accomplish this goal, you will use FORMULAS, rather than numbers in every other cell in the worksheet. In other words, the only place you will type numbers is the green assumptions box. Business Description FIRST TASK: Rename your Excel spreadsheet to your full name After taking business classes, Jake, an avid dog-lover, decided to start selling unique pet supplies at trade shows. He has two products: Product 1: "Throw-it"- a tennis ball thrower that will sell for $15. FORMATTING conventions to use throughout project: - Round all UNITS to the nearest whole unit. Use the "decrease decimals" button on your tool bar rather than the Rounding function. - Show all MONETARY amounts as dollars and cents. Round to the nearest cent. (Sx.xx). Use the "decrease decimals" button rather than the Rounding function. - Show all percentages as %, not as decimals. (x%, not .xx) - Right justify all cells (numbers should be to the right side of the cell, not in the middle or left) Product 2: "Treat-it is an automatic treat dispenser that releases a treat when the dog places his paw on the pedal. The treat dispenser will sell for $40. 1) Complete the assumptions (green box) based on the data about Jake's business. Identify and list all variable costs separately and all fixed costs separately before finding the total for each type of cost. Costs: Jake has hired an employee to work the trade show booths. The work contract is $1,680 per month salary plus a commission equal to 10% of sales revenue. Jake will also spend $800 per month on trade-show entry fees. Jake is purchasing the products from a supplier in China. Throw-It cost $2.50 each; Treat-it-is cost $11 each. Shipping and handling on the Throw-its will cost $6 each; Shipping and handling on the Treat-It- Is, which are heavier, will cost $9 each. The shipping and handling costs will be paid by Jake, not the customer. 2) Complete the Product Analysis (pink boxes) assuming Jake ONLY sells either Product #1 (Throw-it) OR Product #2 (Treat-it-is). Check figures: B/E Product #1 = 496 units; B/E Product #2- 155 units Assume Jake expects to sell 600 Throw-its and 200 Treat-it-is during his first month of operations (June) 3) Complete the CM Income Statement for the month of June (yellow box). HINT: On product line income statements such as this, the fixed costs are only listed in the total column. Make sure you also show the totals for all other line items. Finally, calculate the overall W-A CM% for the company. Check figure: Net Operating Income = $3,720 W-A CM% = 36.47% Jake's financial goal is to earn a net operating income of $6,820 per month. He believes volume may grow at a rate of 6% a month. 4) Calculate the weighted average contribution margin (W-A CM) per unit in blue box). Check figure: W-A CM/unit = $7.75 5) Use the W-A CM/unit to calculate the TOTAL number of units needed to break-even (TOTAL column in the first orange box). THEN, calculate the number of EACH type of product needed to break-even. Finally, calculate the sales revenue associated with this volume for EACH product, and then the sales revenue to break-even in total. Check figures: B/E Product #1 = 240; B/E Product #2= 80 6) Use the W-A CM/unit to calculate the total number of units needed to achieve Jake's target profit (TOTAL column in the second orange box). THEN, calculate the number of EACH type of product needed to achieve the target profit. Finally, calculate sales revenue associated with this volume for EACH product, and then the sales revenue in total. Check figures: B/E Product #1 =900; B/E Product #2= 300 7) Calculate the Margin of Safety (MOS) using June sales as the expected sales (purple box). Calculate the MOS in terms of sales revenue and as a percentage. Also calculate the current degree of operating leverage (round to the nearest 2 decimal places) and use it to determine the expected percentage change in net operating income stemming from an expected change in sales volume. Check figures: MOS%= 60%; Degree of Operating Leverage = 1.67 8) Make sure you have cleaned up your worksheet using the formatting conventions listed above. 9) Submit your file through Canvas by 11:59 PM on March 1, 2020. Throw-it Throw-it) ASSUMPTIONS Product #1: Sales price per unit Variable costs per unit: Jake's Pet Supplies Contribution Margin Income Statement For the month ending June 30 Product #1 Unit CM CM % Breakeven point: -in units -in sales revenue Product #1 Product #2 Total Total variable cost per unit Target profit volume: -in units Monthly volume -in sales revenue Treat-It Is W-A CM% Product #2: Sales price per unit Variable costs per unit: Treat-It Is Product #2 Unit CM CM % Breakeven point: -in units -in sales revenue Calculation of Weighted average CM per unit Product #1 | Product #2 Total Total variable cost per unit Monthly volume Target profit volume: -in units in sales revenue W-A CM/unit Fixed costs per month: | Total fixed costs per month Product #1 Product #12 Tota Multiproduct Breakeven point: -in units Sales revenue at breakeven Target profit per month Expected change in volume (%) | Multiproduct Target profit point: -in units Sales revenue at target profit Margin of Safety (in $) Margin of Safety % Degree of Operating Leverage Expected % change in operating income (96)