Insight, 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 Units produced and Sold (X)Total Cost (Y) 2022 Jan $2,200 00 $36,400 00 Feb $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 Jan $1,900 00 $32,800 00 Feb $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 Questions Analyze the followings if the forecast is true Dollar and Percentage Margin of Safety in 2024 Explain what the numbers mean Degree of Operating Leverage in 2014 Explain what the number means 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 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 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 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 Notes Please support your recommendations with calculations Use ANNUAL figures for your recommendations To determine the annual cost function multiply monthly total Fixed Costs by 12 The slope per unit remains the same for both monthly and annually

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Insight, 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

Insight, 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 Units produced and Sold (X)Total Cost (Y)

2022 Jan $2,200.00 $36,400.00

Feb $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 Jan $1,900.00 $32,800.00

Feb $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

Questions:

Analyze the followings if the forecast is true:
1. Dollar and Percentage Margin of Safety in 2024. Explain what the numbers mean.
2. Degree of Operating Leverage in 2014. Explain what the number means.
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?
1. P1: A market analysis forecasts that a 10% reduction in selling price, combined with an increase of $2,000 in the monthly advertising (FC) budget, will cause unit sales to increase by 1,000 units per month.
2. P2: The company's marketing department thinks that a new packaging would boost monthly sales by $6,000. The new package would increase variable costs by $1.00 per unit.
3. P3: An outside consultant has reported that by automating certain operations, the company can cut 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.

Notes:

Please support your recommendations with calculations. Use ANNUAL figures for your recommendations.

To determine the annual cost function: multiply monthly total Fixed Costs by 12.

The slope per unit remains the same for both monthly and annually.