PART II - COST-VOLUME-PROFIT ANALYSIS (chapter 21 review) CVP analysis involves the examination of the relationship between sales prices, sales and production volume, costs, expenses and of course the eventual profit to be earned given various scenarios. It's often thought of as a great "what-if" tool. Management often requests information from the cost accountants on staff. PROBLEM: Front Range Furniture expects to maintain the same inventories at the end of 20x as at the beginning of the year. The total of all production costs for the year is assumed to be equal to the cost of goods sold. The various department heads were asked to submit estimates of the costs of their It's expected that 12,000 units will be sold at a price of $240 per unit. Maximum sales within the relevant range are 18,000 . Required: 1. Complete the chart in your working papers to calculate total fixed and variable costs (see the Working Papers for more detailed instructions). 2. Once totals are calculated, create a basic Contribution Margin Income Statement. Complete the following analysis: a. Calculate Contribution Margin per unit and Contribution Margin Ratio b. Calculate the Break-Even Point in units and dollars c. Calculate the Margin of Safety in dollars and as a percentage of sales d. Determine the Degree of Operating Leverage 3. Repeat requirement #2 under the following two independent What-If scenarios: a. If total fixed manufacturing costs can be decreased by 125,000 , what are the revised CVP analysis results as a result of that change? b. If total fixed costs increase by $250,000, and to offset the added cost management decides to increase sales price by 20%, causing total sales to decline 15% as a result of that change, what are the revised CVP analysis results as a result of those changes? Provide a summary analysis and recommendations in the space provided to management