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I need help solving this project. Below is the Income Statement for Bikes RUs for the Year Ended December 31, 2021 Bikes R Us Income
I need help solving this project.
Below is the Income Statement for Bikes "R"Us for the Year Ended December 31, 2021 Bikes "R" Us Income Statement For the Year Ended December 31, 2021 $ Sales (200,000) Cost of Goods Sold Gross Profit 1,200,000 700,000 500,000 Operating Expenses Selling Administrative Net Loss 300,000 275,000 575,000 (75,000) $ A cost behavior analysis indicates that 70% of the cost of goods sold are variable, 45% of the selling expenses are variable, and 40% of the administrative expenses are variable. Rounding Instructions - Round FINAL variable cost to 2 decimals, FINAL break even answers to unit and dollar (i.e. no decimals). Format: Prepare parts B and C in CVP income statement format and show all computations using formulas in excel or google sheets for ALL calculations. PART 1 Using the data in the income statement above, compute the break-even point in total sales dollars and in units for 2021. PART 2 PLAN A - Steve, the Accounting Manager, has proposed a plan to improve its profitability. Steve feels that the quality of the product could be substantially improved by spending $0.25 more per unit on better raw materials. The selling price per unit could be increased to $6.25. Steve estimates that sales volume will increase by 20% Compute net income under Steve's proposal and the break-even point in dollars. (NOTE: DO NOT Round the contribution margin ratio.) PART 3 PLAN B - Lisa, was a sales and marketing major in college. Lisa believes that sales volume can be increased only by an intensive advertising and promotional campaign. She proposed the following plan as an alternative Steve's plan: (1) increase variable selling expenses to $0.70 per unit, (2) increase the selling price per unit by $0.40, and (3) increase fixed selling expenses by $50,000. Lisa based her recommendations on an old marketing research report that said that sales volume would increase by 30% if these changes were made. Compute net income under Lisa's proposal and break-even point in dollars. (NOTE: DO NOT Round the contribution margin ratio.) PART 4 Which plan do you believe should be accepted and why? Using good written communication, completely and throughly explain yourStep by Step Solution
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