Exercise 10-37 Scenario Analysis (LO 10-5) As part of the process of preparing the master budget for the coming year, you've been asked to perform what-if analyses, in the form of scenarios, on the original planning assumptions regarding Product A produced by your company. The following are the baseline planning data for the coming year for this product: Sales volume (annual, in units) Selling price per unit Variable cost per unit Fixed costs (per year) $ $ $ 2,500 1,500 1,000 200,000 Required: 1. Based on the baseline planning data, what is the budgeted operating income for Product A for the coming year? 2. Determine the estimated operating income under each of the following scenarios (for each scenario you should report both the new budgeted operating income and the percentage change in operating income from the baseline budgeted result): a. Selling price per unit is 10% higher than planned, while fixed costs per year are also 10% higher than planned. b. Variable cost per unit is 5% higher than planned, while fixed costs are lower by this same percentage. C. Selling price per unit is 10% higher than planned, while volume is decreased by 8%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 2. Determine the estimated operating income under each of the following scenarios (for each scenario you should report both the new budgeted operating income and the percentage change in operating income from the baseline budgeted result): a. Selling price per unit is 10% higher than planned, while fixed costs per year are also 10% higher than planned. b. Variable cost per unit is 5% higher than planned, while fixed costs are lower by this same percentage. C. Selling price per unit is 10% higher than planned, while volume is decreased by 8%. (Negative amounts should be indicated by a minus sign. Round percentage answers to 2 decimal places (i.e., 0.1524 = 15.24%).) Show less A Complete this question by entering your answers in the tabs below. Required 1 Required 2 Based on the baseline planning data, what is the budgeted operating income for Product A for the coming year? Budgeted operating income $ 1,050,000 Required 1 Required 2 2. Determine the estimated operating income under each of the following scenarios (for each scenario you should report both the new budgeted operating income and the percentage change in operating income from the baseline budgeted result): a. Selling price per unit is 10% higher than planned, while fixed costs per year are also 10% higher than planned. b. Variable cost per unit is 5% higher than planned, while fixed costs are lower by this same percentage. c. Selling price per unit is 10% higher than planned, while volume is decreased by 8%. (Negative amounts should be indicated by a minus sign. Round percentage answers to 2 decimal places (i.e., 0.1524 = 15.24%).) Show less Scenario Baseline Operating Income Budgeted Operating Income $ Difference % Change From Baseline from Baseline Op. Income Op. Income Baseline $1,405,000 $ 935,000 $ 1,095,000 $ 1,050,000 $ 1,050,000 $ 1,050,000 $ 355,000 $ 115,000 $ 45,000 34.001% (11.00) 4.28%
