Question
Mark from Mark's Mowers wants to make some changes to his business. He has asked each of his department managers (Production, Marketing and Sales )
| Mark from Mark's Mowers wants to make some changes to his business. He has asked | |||||||||
| each of his department managers (Production, Marketing and Sales ) to submit a plan for | |||||||||
| growth to you the General Manager. | |||||||||
| USE EXCEL** | |||||||||
| Currently Mark is selling 500 lawn mowers a month at $240 each. His variable cost per | |||||||||
| lawnmower is $175 each. His fixed cost per month are $ 25,000. | |||||||||
| For purposes of this project assume that each scenario is within the relevant range (no larger space | |||||||||
| is needed, no additional people will be needed and no additional fixed cost will be necessary. | |||||||||
| Question 1. What is the current income / loss that Mark is incurring per month? | |||||||||
| Question 2. What is Mark's current breakeven in units? | |||||||||
| Question 3. What is Mark's current breakeven in dollars? | |||||||||
| The Production Department is considering three different alternatives. | |||||||||
| A. Switch to better raw materials which would increase Variable cost by 10% per unit. They believe | |||||||||
| this would increase brand awareness and consequently increase unit sales by at least 12.5% | |||||||||
| B. Switch to lower quality materials and become a "price conscience" distributer. The amount that the | |||||||||
| Production department felt best was to decrease Variable cost by 25%. They believe that this would | |||||||||
| likely reduce unit sales by no more than 20%. | |||||||||
C. Finally the Production Department thought a combination of lower quality materials reducing variable costs by 10% combined with a lower retail price of $195 per mower would increase unit sales by at least 25%. Question 4. How much money will Mark make in each of the separate situations? Question 5. Which of the scenarios is best and why?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Management Accounting Information For Decision Making
Authors: Anthony A. Atkinson
7th Edition
1618533517, 9781618533517
