I need help completing an excel project for my Managerial accounting classplease look at the attached file and workbook
spring_2019_cvp_excel_project.xlsx
340_p3.pdf
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CVP Modeling project
The aim of this project is to give you experience creating a multiproduct profitability analysis
that can be used to determine the effects of changing business conditions on the client’s
financial position. Your goal will be to use Excel in such a way that any changes to the
assumptions will correctly ripple through the entire profitability analysis. If executed
properly, the client should be able to use this spreadsheet over and over, using different
“what if” assumptions.
Business Description
After taking business classes, Mike, an avid dog-lover, decided to start selling unique pet
supplies at trade shows. He has two products:
Product 1: “Launch-it”- a tennis ball thrower that will sell for $10.
Product 2: “Treat-time”- an automatic treat dispenser that releases a treat when the dog
places his paw on the pedal. The treat dispenser will sell for $30.
Costs: Mike has hired an employee to work the trade show booths. The work contract is
$1,000 per month plus a commission equal to 10% of revenue. Mike will also spend $500 per
month on trade-show entry fees. Mike is purchasing the products from a supplier in Mexico.
Launch-its cost $1 each; Treat-times cost $7 each. Shipping and handling on the Launch-its
will cost $2 each; Shipping and handling on the Treat-times, which are heavier, will cost $8
each.
The shipping and handling costs will be paid by Mike, not the customer.
Assume Mike expects to sell 200 Launch-its and 100 Treat-times during his first month of
operations (June).
Mike’s financial goal is to earn an operating income of $8,000 per month. He believes
volume may grow at a rate of 5% a month.
Directions
You have been hired by Mike to build a CVP model that will help him understand the impact of business condition
operating income. (See “Starting File” worksheet.) In your model, all of the original assumptions will be listed one
spreadsheet (blue box). All other calculations in the model will reference the assumptions (blue box) such that if a
assumption changes, the effect will ripple through the entire model. To accomplish this goal, you will use FORMU
than numbers, in every other cell in the worksheet. In other words, the only place you will type numbers is the b
assumptions box.
FIRST TASK: Rename your worksheet to your name: Name_CVP_Analysis (e.g., Smith_CVP_Analysis)
FORMATTING conventions to use throughout project:
– Round all UNITS to the nearest whole unit. Use the “decrease decimals” button on your tool bar rather than the
function.
– Show all MONETARY amounts as dollars and cents. Round to the nearest cent. ($x.xx). Use the “decrease decima
rather than the rounding function.
– Show all percentages as %, not as decimals. (x%, not .xx)
– Right justify all cells (numbers should be to the right side of the cell, not in the middle or left)
1) Complete the assumptions (blue box) based on the data about Mike’s business. Identify and list all variable cos
separately and all fixed costs separately before finding the total for each type of cost.
2) Complete the Product Analysis (yellow boxes) assuming Mike ONLY sells either Product #1 (Launch
(Treat -times).
Check figures: B/E Product #1 = 250 units; B/E Product #2= 125 units
3) Complete the pro forma CM Income Statement for the month of June (green box). HINT: On product line incom
statements such as this, the fixed costs are only listed in the total column. Make sure you also show the totals for
line items. Finally, calculate the overall WACM% for the company.
Check figure: Operating income = $900 WACM% = 48%
4) Calculate the weighted average contribution margin (WACM) per unit (in orange box).
Check figure: WACM/unit = $8.00
5) Use the WACM/unit to calculate the TOTAL number of units needed to breakeven (TOTAL column in the first gr
THEN, calculate the number of EACH type of product needed to breakeven. Finally, calculate the sales revenue
with this volume for EACH product, and then the sales revenue to breakeven in total.
Check figures: B/E Product #1 = 125; B/E Product #2= 63
6) Use the WACM/unit to calculate the total number of units needed to achieve Mike’s target profit (TOTAL colum
second gray box). THEN, calculate the number of EACH type of product needed to achieve the target profit. Fina
calculate sales revenue associated with this volume for EACH product, and then the sales revenue in total.
Check figures: B/E Product #1 =792; B/E Product #2= 396
7) Calculate the Margin of Safety (MOS) using June sales as the expected sales (purple box). Calculate the MOS in t
sales revenue and as a percentage. Also calculate the current operating leverage factor (round to the nearest 2 d
places) and use it to determine the expected percentage change in operating income stemming from an expected
sales volume.
Check figures: MOS%= 38%; Operating leverage factor= 2.67
8) Change name of worksheet to “Original Assumptions”.
9) Make sure you have cleaned up your worksheet using the formatting conventions listed above.
9) Make sure you have cleaned up your worksheet using the formatting conventions listed above.
10) Go to the “Advising client” worksheet and follow the directions found there.
11) Check to make sure you have done everything on the grading rubric. Submit your file to Moodle by March 15,
pact of business conditions on his
mptions will be listed one area of the
ns (blue box) such that if any
goal, you will use FORMULAs, rather
will type numbers is the blue
_CVP_Analysis)
r tool bar rather than the Rounding
Use the “decrease decimals” button
or left)
ify and list all variable costs
t #1 (Launch-its) OR Product #2
On product line income
u also show the totals for all other
OTAL column in the first gray box).
culate the sales revenue associated
target profit (TOTAL column in the
eve the target profit. Finally,
s revenue in total.
x). Calculate the MOS in terms of
(round to the nearest 2 decimal
emming from an expected change in
d above.
d above.
e to Moodle by March 15, 11:59 pm.
CVP Model
ASSUMPTIONS
Product #1:
Sales price per unit
Variable costs per unit:
comission
product cost
shipping
Total variable cost per unit
Launch-it
$
10.00
1
1
2
4
Monthly volume
Product #2:
Sales price per unit
Variable costs per unit:
Total variable cost per unit
Monthly volume
Fixed costs per month:
Total fixed costs per month
Target profit per month
Expected change in volume (%)
Product #1
Unit CM
CM %
Breakeven point:
-in units
-in sales revenue
Launch-it
Target profit volume:
-in units
-in sales revenue
Treat-time
Product #2
Unit CM
CM %
Breakeven point:
-in units
-in sales revenue
Target profit volume:
-in units
-in sales revenue
Treat-time
CVP Model
Mike’s Pet Supplies
Pro Forma Contribution Margin Income Statement
For the month ending June 30
Product #1
Product #2
Total
Calculation of Weighted average CM per unit
Product #1
Product #2
Total
WACM %
WACM/unit
Multiproduct Breakeven point:
-in units
Sales revenue at breakeven
Product #1
Product #2
Total
Multiproduct Target profit point:
-in units
Sales revenue at target profit
Product #1
Product #2
Total
Margin of Safety (in $)
Margin of Safety %
Operating Leverage Factor
Expected % change in operating income (%)
EXCEL HINT: To copy an entire
bottom of the screen and choos
Once you have the copy, choos
Once you have built the model, use it to answer Jake’s questions about his business. Treat
each situation as a separate scenario. All comparisons should be made to the original
assumptions.
1. Save a copy of your original model to a new spreadsheet called “supplier cost increase”.
Say the supplier is expected to increase the cost of the products by 30%. What is the new
operating income? What is the new WACM%? What is the new MOS%? Briefly explain
your findings to the client.
Operating income
WACM percentage
MOS%
2. Save a copy of your original model to a new spreadsheet called “new sales mix”. Say
the monthly sales volume is now expected to be 175 “Treat-times” and 125
“Launch-its” (same total units, but a different sales mix). What is the new operating
income? What is the new WACM/unit ? Given this sales mix, how many units (in total) will
Mike need to sell to earn his target profit? Briefly explain your findings to the client.
Operating income
3. Save a copy of your original model to a new spreadsheet called “alternative contract”.
Say Mike’s employee wanted to negotiate a different work contract: $1,550 per month
plus 5% of revenue. Given his original sales volume and mix, how would this contract have
changed Mike’s operating income? What is the new operating leverage factor? What is the
new expected percentage change in operating income if volume increases as expected in
the future? Briefly explain your findings to the client.
Operating income
WACM/unit
Units to earn target profi
Operating leverage facto
Expected % change in op
EXCEL HINT: To copy an entire worksheet, right click on the worksheet tab at the
bottom of the screen and choose “Move or Copy”. Then check the “create a copy” box.
Once you have the copy, choose “rename”.
EXCEL HINT: To copy a cell from a different worksheet, put a
want the number to go, and then go back to the original work
the cell, and then press enter.
NEW
Operating income
ORIGINAL
Change
Brief explanation:
WACM percentage
MOS%
Operating income
Brief explanation:
WACM/unit
Units to earn target profit
Operating income
Operating leverage factor
Expected % change in op inc
Brief explanation:
m a different worksheet, put a + in the cell where you
n go back to the original worksheet, put your cursor on
lanation:
lanation:
lanation:
Grading Rubric
Points possible
Points lost
File specifies your name
5
Original Assumption worksheet
Formatting conventions followed:
units
monetary amounts
percentages
right justified
5
5
5
5
ALL figures used formulas and cell
references except in blue box
15
All figures are correct (check figures
given in directions)
20
Advising Client worksheet
Supplier cost increase (green boxes)
Correct comparison figures
Explanation
5
5
New Sales mix (yellow boxes)
Correct comparison figures
Explanation
5
5
Alternative contract (purple boxes)
Correct comparison figures
Explanation
5
5
Data on worksheet follows
formatting conventions
5
Other 3 Worksheets
Other 3 worksheets properly labeled
5
Total
100
0
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