Use the spreadsheets to create tabs for each cases & each actions.
Hint:
Under the original case, without the effect of any actions or events, the net income after the taxes for the period ending 12/31/2016 is $51,000.
Original Event 1: 14% increase-->25% Event 2: 10% decrease-->75% Total
Action 1--------------->X ------------------>XX ----------------------->XXX Event 1+ Event 2 (XX+XXX)
Action 2--------------->X ------------------>XX ----------------------->XXX Event 1+ Event 2 (XX+XXX)
Objectives accumulated and The objectives of this assignment are to: a) enhance your understanding of how product costs are how they impact the company's net income; b) develop your skills in developing a decision model Excel spreadsheet software; and c) improve your ability to interpret the results and communicate them in writing an verbally. Decision Model (Or nal data case You are building a decision model for Cyrus Corporation, a California manufacturer of baby stroller, based on the data given in the Appendix 1. This includes a schedule of cost of goods manufactured, a schedule of cost of goods sold, and an income statement. In addition to the given data, you learn through interviews with Company management that they are considering taking one of the following two courses of action in order to improve the company's net income: Action 1 Purchase additional factory equipment of $180,000 which will be depreciated $30,000 annually Action 2: Reduce the number of production supervisors which will decrease Variable Costs by at least $40,000 However, there are some disagreements between the President and Vice President of Sales and Marketing of the Cyrus Corporation relating to these actions. The President believes that taking these two actions will increase the sales by at least 14%. He firmly believes the probability of this increase occurring is 25%. The Vice President of Sales and Marketing argues even with these two actions sales will drop at least by 10% due to market saturation and tight competition. He cites that there are four other baby stroller manufactures in State of California. He believes based on these facts the probability of sales reducing is at least75% Sensitivity Analysis (Alternative eases 1.2 As the debate between the President and Vice President of Sales and Marketing continues, the Chairman of the Board of Directors asks the Chief Financial Officer to prepare two other alternatives with the following probability assumptions Alternative case 1: Assign probabilities of 30% and 70% to the two events, respectively. Alternative case 2: Assign probabilities of20%, and 80% to the two events, respectively. Keep in mind that your decision model must incorporate the following elements: Possible outcomes given the various actions and events. Expected value of each possible outcome Cost of Goods Sold will change in proportion of sales change Each action stands alone
