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CVP Modeling project 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. If executed properly, the client should be able to use this spreadsheet over and over, using different "what if" assumptions. Business Description 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: "Launch-it"- a tennis ball thrower that will sell for $12. Product 2: "Treat-time"- an automatic treat dispenser that releases a treat when the dog places his paw on the pedal. The treat dispenser will sell for $32. Costs: Jake has hired an employee to work the trade show booths. The work contract is $1,200 per month plus a commission equal to 10% of revenue. Jake will also spend $800 per month on trade-show entry fees. Jake is purchasing the products from a supplier in Mexico. Launch-its cost $1 each; Treat-times cost $7 each. Shipping and handling on the Launch-its will cost $2 each; Shipping and handling on the Treat-times, which are heavier, will cost $8 each. The shipping and handling costs will be paid by Jake, not the customer. Assume Jake expects to sell 200 Launch-its and 100 Treat-times during his first month of operations (June). Jake's financial goal is to earn an operating income of $8,000 per month. He believes volume may grow at a rate of 5% a month. Launch-it Launch-it $ $ 7.80 0.65 Jake's Pet Supplies Pro Forma Contribution Margin Income Statement For the month ending June 30 ASSUMPTIONS Product #1: Sales price per unit Variable costs per unit: Cost of Good Shipping Commission Total variable cost per unit Product #1 Unit CM CM% Breakeven point: in units -in sales revenue Product #1 Product #2 12 1 1 2 1.2 4.2 Total Target profit volume: in units in sales revenue Sales revenue Less: variable expenses Contribution margin less: fixed expenses Operating Income Monthly volume 200 WACM % Treat-time 32 7 Product #2: Sales price per unit Variable costs per unit: Cost of Good Shipping Commission Total variable cost per unit Treat-time $ $ 13.80 0.43 Product #2 Unit CM CM% Breakeven point: in units -in sales revenue 7 8 Total Calculation of Weighted average CM per unit Product #1 Product #2 $ 7.80 $ 13.80 200 100 3.2 18.2 CM/unit Sales mix( # of units sold of each) Contibution margin Monthly volume 100 Target profit volume: in units in sales revenue WACM/unit Fixed costs per month: Work Contract Trade-Show Total fixed costs per month 1200 800 2000 Product #1 Product #2 Total Multiproduct Breakeven point: in units Sales revenue at breakeven Target profit per month Expected change in volume (%) Product #1 Product #2 Total Multiproduct Target profit point: in units Sales revenue at target profit Margin of Safety (in $) Margin of Safety % Operating Leverage Factor Expected % change in operating income (%)