Cost, Volume, Profit Project
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Cost, Volume, Profit Project
Cost, Volume, Profit Project
Prem Narayan, a graduate student in engineering, to market a radical new speaker he had designed for automobile
sound systems, founded Acoustic Concepts, Inc. Prem established the company’s headquarters into rented quarters
in a nearby industrial park. He hired a receptionist, an accountant, a sales manager, and a small sales staff to sell the
speakers to retail stores. Prem asked his accountant, Bob Luchinni, to prepare several cost-volume-profit analyses,
using the information shown below.
Sales price for one speaker set …………………………………………… $250
Variable manufacturing cost for each speaker set (direct
materials) ………………………………………………………………………..
Fixed expenses per month (rent, salaries of receptionist, sales
people, accountant, and Prem) ……………………………………………
Number of speaker sets sold per month ………………………………. 400
$150
$35,000
1.Based on the above information, how many stereo speaker sets will need to be sold for Acoustic Concepts, Inc.,
to break even for one month?
2.Based on the above information, how many stereo speaker sets will need to be sold for Acoustic Concepts, Inc.,
to earn a $1,000 profit for one month?
3.What will be the net income or net loss for one month if 400 speaker sets are sold? How about if 425 speakers
are sold?
4.The sales manager feels that a $10,000 increase in monthly advertising will increase monthly sales by $30,000.
Would you recommend increasing the advertising budget?
5.Prem and other management personnel are considering the use of higher-quality components, which would
increase variable costs by $10 per speaker. However, the sales manager predicts that the higher overall quality
would increase sales to 480 speaker sets per month. Should the higher quality components be used?
6.The sales manager believes that by reducing the selling price of speakers by $20, and also by increasing the
advertising budget by $15,000 per month, that sales will increase to 600 speaker sets per month. Should the
changes be made?
7.The sales manager would like to place the sales staff on a commission basis of $15 per speaker sold, rather than
on flat salaries that now total $6,000 per month. The sales manager is confident that the change will increase
monthly sales to 460 speaker sets per month. Should the change be made?
- Suppose Acoustic Concepts has an opportunity to make a bulk sale of 150 speakers to a wholesaler, if an
acceptable price can be worked out. The sale would not disturb the company’s regular sales, nor would if affect
fixed operating costs per month. What price should be quoted to the wholesaler if Acoustic Concepts wants to
increase its monthly profits by $3,000?
- C.M.=contribution margin, S.P.=sales price, V.C.=variable cost, F.C.=fixed cost
- C.M. per unit = S.P. per unit – V.C. per unit
- The break even point is the point at which the total contribution margin equals fixed costs.
- Break even units sold = F.C. / C.M. Per unit
- Break even sales dollars = F.C. / C.M. Percentage
- C.M. Percentage = C.M. per unit / S.P. per unit, or C.M. (total) / Sales (total)
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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