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CVP Analysis

Just help with the recap tab in excel , which allocation method is best and why you choose what you choose??

POR tab-questions under this tab
CVP tab-questions under this tab

(See attached file for full problem description)

Jill's Jackets makes two types of Jackets: lined and unlined.
Her accountant provided a income statement (RegIncome tab) but Jill needs
more information to make some business decisions.

Using the financial data provided, please do the following:

1. Determine the expense type for each expense on Jill's income statement (see tab ExpType)

2. Prepare an Income Statement using the Contribution Margin format separating expenses into four categories:
Direct variable product expenses
Indirect variable product expenses
Indirect fixed product expenses
Fixed General and Administrative expenses
See tab ContMargin

3. Using the same format, prepare a product income statement by allocating Variable Indirects and
Fixed Indirects between lined and unlined jackets. Use direct labor to allocate these expenses (see tab ByLabor).

4. Calculate how Variable and Fixed indirects would have been allocated using revenue and using
units produced (use ByRev and ByUnits tabs). Which allocation method do you think is best?

5. Calculate the predetermined overhead rate if indirects are allocated using direct labor. Also, calculate
the POR if using units to allocate indirects. Note: The factory wages budget was prepared using a wage
of $15 per hour. Use POR tab.

6. Determine the impact of the following scenarios: (use CVP tab)

6A. What is Jill's breakeven in units and $? (Assuming the sales mix of lined and unlined stays the same)
6B. Which would be better for Jill - to push more lined jackets or unlined?
6C. Should Jill drop the lined jacket product? If she wanted to keep it, what could she do to
improve the profitability?
6D. Jill has been offered an special order for 10000 more unlined jackets
but they would have to include the customer's logo on the back of the jacket.
She has found a vendor to do this for her at a cost of $3 per jacket.
D1. How much would net income change if he accepted the order?
D2. If Jill were to bid this for this order, what should she charge per Jacket? Why?
What price should she charge to keep her product margin percentage the same?


Solution Summary

The solution has the CVP analysis for Jill's Jackets