The project requires the comparison of two competing proposals. Only one will be selected. The details of the proposals are as follows:

1. The Production Manager wants to invest $250,000 into new manufacturing equipment that will improve the efficiency and quality of the production process. The production manager has been pushing for this investment for months and has stated that the variable manufacturing cost of the product will decrease by $10 per unit. The investment will cause an increase in the fixed manufacturing costs in the form of annual depreciation expense of $50,000 on the new equipment. The accounting numbers are as follows: i. Decrease in Variable cost of $10 per unit ii. Increase to annual Fixed cost of $50,000

2. The Sales Manager wants to implement a 3 year marketing campaign at a total cost of $150,000 ($50,000 annually for 3 years) and to decrease the selling price of the product by $13 dollars. He guarantees this will increase sales units by 25%. The accounting numbers are as follows: i. Decrease in Selling price per unit of $13 ii. Increase in annual marketing expense (fixed cost) of $50,000 iii. Increase in sales units by 25% (at the new lower per unit selling price)

You will need to complete a Contribution Margin Report based on the current revenue and expenses and also one for each of the proposals. In addition to the Contribution Margin Report you will also need to include the following calculations for the current and for each of the proposals: The Breakeven point in sales units and dollars, the margin of safety in dollars and percentage. For the analysis of the two proposals ignore the net present value of cash flows. After you have completed your analysis you will need to make your recommendation on the course of action that will be the most advantageous to the company. Be complete in your analysis and prepare a memo to your boss Sally outlining your findings and provide support for your recommendation. [Be sure to include all of the information that the data is providing.] Use the tab in the excel workbook marked Analysis of Proposals for your analysis. Use the Word document Memo to Sally for your report to your boss.

Student Name: Enterprises Set up a Contribution Margin Statement for Product A to use for your analysis You gathered the following per unit information from the Company's accounting system for Product A: Unit Sales 5,344 Sales Price per Unit $225.00 Variable Cost per unit $137.00 Total Traceable Fixed Cost $357,245.00 Using the above data prepare a current contribution margin report and a Forecasted contribution margin report (one for each of the proposals reflecting each of their proposed changes). You use a template that you kept from when you took Managerial Accounting at CLU. You saved all of the templates you used in Managerial Accounting because you knew someday you would need them! Production Propsal Current Per Unit % of Sales Current Proposed per Unit % of Sales Forecasted based on Proposal Difference Units Sold Sales Variable Cost Contribution Margin Traceable Fixed Cost Profit (Loss) Sales Proposal Current Per Unit % of Sales Current Proposed per Unit % of Sales Forecasted based on Proposal Difference Units Sold Sales Variable Cost Contribution Margin Traceable Fixed Cost Profit (Loss) Current Breakeven in Sales Units _____ Breakeven in Sales Dollars _____ Margin of Safety in sales dollars _____ Margin of Safety % ____ Production Propsal Breakeven in Sales Units_____ Breakeven in Sales Dollars ____ Margin of Safety in sales dollars ____ Margin of Safety % ____ Sales Proposal Breakeven in Sales Units ____ Breakeven in Sales Dollars _____ Margin of Safety in sales dollars ____ Margin of Safety % _____

Enterprises Inc.

Memo

To: Sally From: Your Name Date: Date Re: Analysis of the two proposals Directions ;Write A memo that analysis the two proposals