Prepare a contribution margin income statement (also called a variable-costing income statement) for the manufacturing company for the upcoming year.

1. Compute the companys contribution margin per unit and contribution margin percentage for the upcoming year. The contribution margin percentage is calculated as contribution margin per unit / selling price per unit or as total contribution margin / total revenue. Make these calculations below your income statement. Clearly label these calculations.
2. Calculate the companys breakeven point in units for the upcoming year. Make this calculation below your contribution margin calculations. Use Excels round function to round up to the nearest whole number. To do this, move your curser to the cell beside the decimal number and key in the following formula: =ROUNDUP(cell reference,0). The italicized cell reference means you need to key in the cell where the decimal number is located (e.g., F12). The number 0 means zero decimal places. Clearly label this calculation.
3. Calculate the companys breakeven point in sales dollars for the upcoming year. Make this calculation below your breakeven calculation in units and use the companys contribution margin percentage to make this calculation. Clearly label this calculation.

Complete Four Scenarios (What-if Analyses)

You want to determine whether the following four suggestions (i.e., e, f, g, h) would improve the companys performance. Determine the effects of each suggestion on operating income, contribution margin per unit, contribution margin percentage, breakeven point in units, and breakeven point in sales dollars.

Calculate the effects of each suggestion independently of the other suggestions. In other words, use the original baseline case data and make the first change (e); use the original baseline case data and make the second change (f); and so on. However, do not overwrite the original baseline case. The easiest way to do this is to copy the original data to a new sheet and then replace the original data parameters. To copy a sheet, click on the sheet name. Select Move or Copy. Click on the Create a copy box. Click OK. Rename your new sheet to indicate the name of the new scenario. For example, you could name the sheet for (e) Commission. To rename a sheet, right click on the sheet name. Select Rename. Key in the new name.

1. Put all personnel on commission. This action would affect the sales salaries and commissions expense by eliminating the fixed portion and increasing the variable portion by $4.50 per unit. Sales would increase by 44,000 units.
2. Redesign the package for the product. This would decrease the variable direct materials cost by $1.50 per unit but would increase the fixed factory overhead by $36,000.
3. Launch a new advertising campaign. This would increase fixed advertising expense by $348,000 but would increase sales volume by 4,800 units.
4. Reduce the selling price of the product by $15.00 per unit. This would increase sales volume by 16,800 units.
5. Write a memo, explaining whether the company should use any of the suggestions. Create your memo in Word, not Excel. Use proper memo format. Word has a memo template (FILE | NEW | type in memo in the search for online templates box).

PARAMETERS FOR BASELINE CASE
The following numbers are estimates for the upcoming year for a manufacturing company.
Since the company is effective at implementing a JIT inventory system, assume there is
no beginning or ending inventory.
No. of units sold	120,000
Selling price per unit	$240.00
	Fixed Expenses	Variable Expenses (per unit sold
Production costs:
Direct materials		$18.00
Direct labor		36.00
Factory overhead	$2,160,000	24.00
Marketing expenses:
Sales salaries and commissions	540,000	7.50
Advertising	360,000
Miscellaneous mktg. expenses	108,000
Administration expenses:
Office salaries	720,000
Supplies	105,000	1.50
Miscellaneous admin. expenses	72,000
TOTAL EXPENSES	$4,065,000	$87.00