Please include how you got answers
Launch-it $ Jake's Pet Supplies Pro Forma Contribution Margin Income Statement For the month ending June 30 Calculation of Weighted average CM per unit Product #1 Product #2 6.00 60% Total ASSUMPTIONS Product #1: Sales price per unit Variable costs per unit: Commision Launch cost per unit Shipping and handling Total variable cost per unit Product #1 Launch-it Unit CM $ 10.00 ||CM % Breakeven point: $ 1.00 -in units $ 1.00 -in sales revenue $ 2.00 $ 4.00 ||Target profit volume: -in units $ 200.00 -in sales revenue $ $ Product #1 Product #2 2,000.00 $ 3,000.00 $ 250.00 2,500.00 Sales revenue $ minus variable costs: Commisions $ $ 1,583.33 Shipping and handling $ 15,833.33 || Purchase cost $ Total Variable costs $ Contribution Margin Sales units Total Margin per unit 5,000.00 WACM/unit 500.00 1,200.00 900.00 2,600.00 Multiproduct Breakeven point: $ 200.00 $ 400.00 $ 200.00 $ 800.00 $ 300.00 $ 800.00 $ 700.00 $ 1,800.00 $ Monthly volume S Product #1 Product #2 Total Treat-time Contribution Margin $ 1,200.00 $ 1,200.00 $ 2,400.00 $ 12.00 Product #2: Sales price per unit Variable costs per unit: Commison Treat cost per unit Shipping and handling Total variable cost per unit Treat-time $ 30.00 | Product #2 Unit CM $ 3.00 CM % $ 7.00 Breakeven point: $ 8.00 -in units $ 18.00 -in sales revenue Sales revenue at breakeven $ $ S 500.00 40% | Fixed costs: Entry fees 125.00 || Salary 3,750.00 || Total fixed costs: S $ $ $ Product #1 Product #2 Total 1,000.00 Multiproduct Target profit point: 1,500.00 S Monthly volume $ 900.00 Operating income 791.67 23,750.00 | WACM% Sales revenue at target profit $ $ $ S $ 48% Fixed costs per month: Salary Entry fee Total fixed costs per month $ 100.00 || Target profit volume: -in units -in sales revenue $ 1,000.00 $ 500.00 $ 1,500.00 Margin of Safety (in $) Target profit per month $ 8,000.00 Margin of Safety % Expected change in volume (%) 5.00% Operating Leverage Factor Expected % change in operating income (%) FIRST TASK: Rename your worksheet to you and your partner's name and ID#s: Name ID#_Name ID# 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. FORMATTING conventions to use throughout project: Round all UNITS to the nearest whole unit. Use the "decrease decimals" button on your tool bar rather than the Rounding function. Show all MONETARY amounts as dollars and cents. Round to the nearest cent. ($x.xx). Use the "decrease decimals" button rather than the rounding function Show all percentages as %, not as decimals. (x%, not .xx) Right justify all cells (numbers should be to the right side of the cell, not in the middle or left) 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: 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. Product 1: "Launch-it"- a tennis ball thrower that will sell for $10. 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. 2) Complete the Product Analysis (yellow boxes) assuming Jake ONLY sells either Product #1 (Launch-its) OR Product #2 (Treat- times). Check figures: B/E Product #1 = 250 units; B/E Product #2= 125 units 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 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 3) Complete the pro forma CM Income Statement for the month of June (green box). HINT: On product line income statements 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, calculate the overall WACM% for the company. Check figure: Operating income = $900 WACM% = 48% 4) Calculate the weighted average contribution margin (WACM) per unit (in orange box). Assume Jake expects to sell 200 Launch-its and 100 Treat-times during his first month of operations (June). Check figure: WACM/unit = $8.00 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. O 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; B/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 sales volume. Check figures: MOS%= 38%; Operating leverage factor= 2.67 Launch-it $ Jake's Pet Supplies Pro Forma Contribution Margin Income Statement For the month ending June 30 Calculation of Weighted average CM per unit Product #1 Product #2 6.00 60% Total ASSUMPTIONS Product #1: Sales price per unit Variable costs per unit: Commision Launch cost per unit Shipping and handling Total variable cost per unit Product #1 Launch-it Unit CM $ 10.00 ||CM % Breakeven point: $ 1.00 -in units $ 1.00 -in sales revenue $ 2.00 $ 4.00 ||Target profit volume: -in units $ 200.00 -in sales revenue $ $ Product #1 Product #2 2,000.00 $ 3,000.00 $ 250.00 2,500.00 Sales revenue $ minus variable costs: Commisions $ $ 1,583.33 Shipping and handling $ 15,833.33 || Purchase cost $ Total Variable costs $ Contribution Margin Sales units Total Margin per unit 5,000.00 WACM/unit 500.00 1,200.00 900.00 2,600.00 Multiproduct Breakeven point: $ 200.00 $ 400.00 $ 200.00 $ 800.00 $ 300.00 $ 800.00 $ 700.00 $ 1,800.00 $ Monthly volume S Product #1 Product #2 Total Treat-time Contribution Margin $ 1,200.00 $ 1,200.00 $ 2,400.00 $ 12.00 Product #2: Sales price per unit Variable costs per unit: Commison Treat cost per unit Shipping and handling Total variable cost per unit Treat-time $ 30.00 | Product #2 Unit CM $ 3.00 CM % $ 7.00 Breakeven point: $ 8.00 -in units $ 18.00 -in sales revenue Sales revenue at breakeven $ $ S 500.00 40% | Fixed costs: Entry fees 125.00 || Salary 3,750.00 || Total fixed costs: S $ $ $ Product #1 Product #2 Total 1,000.00 Multiproduct Target profit point: 1,500.00 S Monthly volume $ 900.00 Operating income 791.67 23,750.00 | WACM% Sales revenue at target profit $ $ $ S $ 48% Fixed costs per month: Salary Entry fee Total fixed costs per month $ 100.00 || Target profit volume: -in units -in sales revenue $ 1,000.00 $ 500.00 $ 1,500.00 Margin of Safety (in $) Target profit per month $ 8,000.00 Margin of Safety % Expected change in volume (%) 5.00% Operating Leverage Factor Expected % change in operating income (%) FIRST TASK: Rename your worksheet to you and your partner's name and ID#s: Name ID#_Name ID# 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. FORMATTING conventions to use throughout project: Round all UNITS to the nearest whole unit. Use the "decrease decimals" button on your tool bar rather than the Rounding function. Show all MONETARY amounts as dollars and cents. Round to the nearest cent. ($x.xx). Use the "decrease decimals" button rather than the rounding function Show all percentages as %, not as decimals. (x%, not .xx) Right justify all cells (numbers should be to the right side of the cell, not in the middle or left) 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: 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. Product 1: "Launch-it"- a tennis ball thrower that will sell for $10. 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. 2) Complete the Product Analysis (yellow boxes) assuming Jake ONLY sells either Product #1 (Launch-its) OR Product #2 (Treat- times). Check figures: B/E Product #1 = 250 units; B/E Product #2= 125 units 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 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 3) Complete the pro forma CM Income Statement for the month of June (green box). HINT: On product line income statements 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, calculate the overall WACM% for the company. Check figure: Operating income = $900 WACM% = 48% 4) Calculate the weighted average contribution margin (WACM) per unit (in orange box). Assume Jake expects to sell 200 Launch-its and 100 Treat-times during his first month of operations (June). Check figure: WACM/unit = $8.00 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. O 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; B/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 sales volume. Check figures: MOS%= 38%; Operating leverage factor= 2.67
