PLEASE ANSWER USING EXCEL just as required. Many thanks in advance!
Instructions:
CVP Modeling project Directions The purpose of this project is to give you experience creating a multiproduct profitability analysis You have been hired by Jake to build a CVP model that will help him understand the impact of business conditions on his operating that can be used to determine the effects of changing business conditions on the client's financial income. (See "Starting File" worksheet.) In your model, all of the original assumptions will be listed one area of the spreadsheet position. Your goal will be to use Excel in such a way that any changes to the assumptions will (blue box). All other calculations in the model will reference the assumptions (blue box) such that if any assumption changes, the correctly ripple through the entire profitability analysis. If executed properly, the client should be effect will ripple through the entire model. To accomplish this goal, you will use FORMULAs, rather than numbers, in every other able to use this spreadsheet over and over, using different "what if" assumptions. cell in the worksheet. In other words, the only place you will type numbers is the blue assumptions box. FORMATTING conventions to use throughout project: Business Description - Round all UNITS to the nearest whole unit. Use the "decrease decimals" button on your tool bar rather than the Rounding function. After taking business classes, Jake, an avid dog-lover, decided to start selling unique pet supplies at Show all MONETARY amounts as dollars and cents. Round to the nearest cent. (5x.xx]. Use the "decrease decimals" button rather trade shows. He has two products: than the rounding function. Show all percentages as %, not as decimals. (x%, not .xx) Product 1: "Launch-it"- a tennis ball thrower that will sell for $10. Right justify all cells (numbers should be to the right side of the cell, not in the middle or left) 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 $30. 1) Complete the assumptions (blue box) based on the data about Jake's business. Identify and list all variable costs separately and all fixed costs separately before finding the total for each type of cost. Costs: Jake has hired an employee to work the trade show booths. The work contract is $1,000 per month plus a commission equal to 10% of revenue. Jake will also spend $500 per month on 2) Complete the Product Analysis (yellow boxes) assuming Jake only sells either Product #1 (Launch-its) OR Product #2 (Treat - trade-show entry fees. Jake is purchasing the products from a supplier in Mexico. Launch-its cost times). $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 Check figures: B/E Product #1 = 250 units; B/E Product #2= 125 units handling costs will be paid by Jake, not the customer. 3) Complete the pro forma CM Income Statement for the month of June (green box). HINT: On product line income statements Assume Jake expects to sell 200 Launch-its and 100 Treat-times during his first month of such as this, the fixed costs are only listed in the total column. Make sure you also show the totals for all other line items. Finally, operations (June). calculate the overall WACMX for the company. Jake's financial goal is to earn an operating income of $8,000 per month. He believes volume may Check figure: Operating income = $900 WACMX = 48% grow at a rate of 5% a month. 4) Calculate the weighted average contribution margin (WACM) per unit (in orange box). Check figure: WACM/unit = $8.00 5) Use the WACM/unit to calculate the TOTAL number of units needed to breakeven (TOTAL column in the first gray box). THEN, calculate the number of EACH type of product needed to breakeven. Finally, calculate the sales revenue associated with this volume for EACH product, and then the sales revenue to breakeven in total. Check figures: B/E Product #1 = 125; B/E Product #2= 63 6) Use the WACM/unit to calculate the total number of units needed to achieve Jake's target profit (TOTAL column in the second gray box). THEN, calculate the number of EACH type of product needed to achieve the target profit. Finally, calculate sales revenue associated with this volume for EACH product, and then the sales revenue in total. Check figures: B/E Product #1 =792; 8/E Product #2= 396 7) Calculate the MOS using June sales as the expected sales (purple box). Calculate the MOS in terms of sales revenue and as a percentage. Also calculate the current operating leverage factor (round to the nearest 2 decimal places) and use it to determine the expected percentage change in operating income stemming from an expected change in sales volume. Check figures: MO5%= 38%; Operating leverage factor= 2.67 8) Change name of worksheet to "Original Assumptions". 9) Make sure you have cleaned up your worksheet using the formatting conventions listed above. 10) Go to the "Advising client" worksheet and follow the directions found there.A B E G H K M N 0 Q R S T U EXCEL HINT: To copy an entire worksheet, right click on the worksheet tab at the bottom of the screen and choose "Move or Copy". Then check the "create a copy" box. Once you have the copy, choose "rename". EXCEL HINT: To copy a cell from a different worksheet, put a + in the cell where you want the Once you have built the model, use it to answer Jake's questions about his business. Treat each number to go, and then go back to the original worksheet, put your cursor on the cell, and situation as a separate scenario. All comparisons should be made to the original assumptions. then press enter. 1. Save a copy of your original model to a new spreadsheet called "supplier cost increase". Say NEW ORIGINAL Change 10 the supplier is expected to increase the cost of the products by 20%. What is the new operating Operating income Brief explanation: 11 income? What is the new WACM? What is the new MOS%? Briefly explain your findings to the client. 12 WACM percentage 13 14 MOS% 15 16 17 2. Save a copy of your original model to a new spreadsheet called "new sales mix". Say the 18 monthly sales volume is now expected to be 175 "Treat-times" and 125 Operating income Brief explanation: 19 "Launch-its" (same total units, but a different sales mix). What is the new operating income? 20 What is the new WACM/unit ? Given this sales mix, how many units (in total) will Jake need to sell to earn his target profit? Briefly explain your findings to the client. WACM/unit 21 22 Units to earn target profit 23 24 25 26 3. Save a copy of your original model to a new spreadsheet called "alternative contract". Say 27 Jake's employee wanted to negotiate a different work contract: $1,500 per month plus 5% of Operating income Brief explanation: 28 revenue. Given his original sales volume and mix, how would this contract have changed Jake's operating income? What is the new operating leverage factor? What is the new expected 29 percentage change in operating income if volume increases as expected in the future? Briefly Operating leverage factor 30 explain your findings to the client. 31 Expected % change in op inc 32 33 34A B C D E F Grading Rubric Points possible Points lost SWNK File name specifies Name 5 Original Assumption worksheet Formatting conventions followed: 7 units monetary amounts percentages 10 right justified 11 ALL figures used formulas and cell 15 12 references except in blue box 13 All figures are correct (check figures given 20 14 in directions) 15 16 Advising Client worksheet 17 18 Supplier cost increase (green boxes) 19 Correct comparison figures Un un 20 Explanation 21 22 New Sales mix (yellow boxes) 23 Correct comparison figures 24 Explanation 25 26 Alternative contract (purple boxes) 27 Correct comparison figures 28 Explanation 29 Data on worksheet follows formatting 30 conventions 31 32 Other 3 Worksheets 33 Other 3 worksheets properly labeled 5 34 35 Total 100 36 37 Total Score: 100 38 39 40 41 42 Business & Directions Starting file Advising client Sheet1B E F G H K ASSUMPTIONS Product #1 Launch-it Jake's Pet Supplies Product #1: Launch-it Unit CM Pro Forma Contribution Margin Income Statement Sales price per unit CM For the month ending June 30 Variable costs per unit: Breakeven point -in units Product #1 Product #2 Total -in sales revenue Total variable cost per unit Target profit volume: 10 -in unit 11 Monthly volume -in sales revenue 12 13 Product #2: Treat-time WACM %% 14 Sales price per unit Product #2 Treat-time 15 Variable costs per unit: Unit CM 16 M% Calculation of Weighted average CM per unit 17 Breakeven point: Product #1 Product #2 Total 18 -in units 19 Total variable cost per unit -in sales revenue 20 21 Monthly volume Target profit volume: 22 -in units WACM/unit 23 Fixed costs per month: -in sales revenue 24 25 26 Total fixed costs per month Multiproduct Breakeven point: Product #1 Product #2 Total 27 -in units 28 Target profit per month Sales revenue at breakeven 29 30 Expected change in volume () Multiproduct Target profit point: Product #1 Product #2 Total -in units Sales revenue at target profit 33 34 Margin of Safety (in $) 35 36 Margin of Safety % Operating Leverage Factor Expected % change in operating income (%) Business & Directions Starting file Advising client Sheet1 +
