Q1 5 points each for calculating the contribution margin for each product - total 15 points

Please note that Q2 and Q3 use differential analyses (think relevant and irrelevant information). Do not use irrelevant information in calculating the effect on the profit. Taking the long approach will result in deduction of points

Q2- require one number (the loss if product A is discontinued) that number and short narrative interpreting the number calculated = 4 points

Q3 5 points each loss on discontinuing and profit on adding the third product the answer should have a short narrative as well -2 points = 12 points

Q4 calculate the effect and provide a short narrative for your response = 10 points

Q5 Purchase budget 6 points for each month each month has 4 numbers and each number should be correct = total for purchase budget = 18 points

Q5 Cash receipts budget same as above = 18 points

Q6 6 points NPV and 2 points for ARR no explanation required = total 8 points

Peter Johnson and Lily Brown own Johnson Manufacturing Company (Johnson). Johnson produced storage sheds in three primary models (A, B, and C). The industry was dominated by Coleman, Phoenix, and Meco, which made several of types of sheds. Johnson was a small player in the industry with a solid customer base and a profitable business over last few years. This year was a little different their profit was significantly lower than the prior years. The companys 2017 financials are provided in Exhibit 1. The company produces 3 products lets call them Shed A, B and C for simplicity. The standard costs for these three products are provided in Exhibit 2. The Selling, general, and administrative (SG&A), other costs, interest income, and interest expense are likely to remain the same no matter which product-line combinations the company produced. The company is thinking about the future and has provided a preliminary proforma 2018 sales budget in Exhibit 3. Favorable preliminary 2018 forecasts lead management to believe there will be excess cash flow in 2018. Management has requested that a consultant be hired to provide an analysis of several proposed 2018 investments. The details of the proposed investments are provided in Exhibit 4. The company hires your services as their consultant. They believe that they can improve their bottom-line (net profits) by changing the product mix, pricing and advertising decisions. Given that the plant currently runs at full capacity, examine the following independent scenarios:

1. Calculate the current contribution margins of each product.