Oslow Company prepared the following contribution format income statement based on a sales volume of 2,000 units (the relevant range of production is 500 units to 1,500 units).

Sales $20,000

Variable Expenses 12,000

Contribution Margin 8,000

Fixed Expenses 6,000

Net Operating Income $ 2,000

One member of Oslow Company (Mr. Adrian) has challenged the fixed expenses. Mr. Adrian says There is no such thing as a fixed cost. All costs can be unfixed given sufficient time. Mr. Adrian also has made the comment that gross margin is more significant than contribution margin. And he states that since Oslow Company produces multiple products, CVP analysis cannot be computed. Mr. Adrian has been vocal with his thoughts throughout the production departments of Oslow Company.

Oslow has never utilized CVP methodologies before. You are the new CFO for Oslow Company. How would you convince Mr. Adrian and other executive-level staff that CVP analysis would benefit Oslow Company?

In order to formulate your recommendation, you may want to carefully consider the problem, the three (3) CVP assumptions, collect relevant data and information, critically evaluate the alternatives, and document your recommendations using sound arguments that are well supported, properly vetted, and logically presented.