Suppose you are going to start a new business, do the projected following financial statements, and analyse them in your own words:

1. Manufacturing Account
2. Trading Account
3. Profit & Loss Account
4. A break-even analysis

From your accounts, you find out the

1. Manufacturing cost
2. Gross margin
3. Net margin
4. Variable cost
5. Fixed cost
6. margin of safety
7. Contribution Margin
8. Break-even unit
9. Break-even revenue
10. Targeted operating profit before and after tax

Then,

(1) Give a background description of your business.

(2) Analyse the importance of each of the above accounts.

(3) Identify the essential elements of cost-volume –profit analysis.

(4) Apply the CPV model to calculate a target operating profit.

(5) Apply the CPV model in decision making, and explain how sensitivity analysis can help managers both identify and manage risks.