Problem no. 3 Cases for decision: A . You are the Operations Manager. As a start up manufacturer you wish to identify the behavior of manufacturing costs to develop a production cost budget. You know how these costs behave and can be used to identify cost behavior from past data, but past data are unavailable because this is a start-up. What do you do?

B. You are a Supervisor. Your team is conducting a cost-volume-profit analysis for a new product. Different sales projections have different incomes. One member suggests picking numbers yielding favorable income because any estimate is as good as any other. Another member points to a scatter diagram of 20 Page 2

months production on a comparable product and suggests dropping unfavorable data points for cost estimation. What do you do?

C. You are the entrepreneur. A CVP analysis indicates that at your start up, which markets electronic products, will break even with the current sales mix and price levels. You have a target income in mind. What analysis might you perform to assess the likelihood of achieving this income?