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    CVP Analysis- Tablet Development Company Scenario

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    It's New Year's Day, 2016. You just had a great New Year's Eve celebration; you finished analyzing the performance of Tablet Development and are ready to charge ahead into the future. As you turn on the TV and try to open your eyes, you notice something strange (again). The TV commentator is saying something about New Year's Day, 2012. You have a sinking feeling, and sure enough, it's back to 1/1/2012. You realize that you are in Time Warp 2.

    This time you decide to do your decision making differently. You are going to use a technique that you became familiar with last year, CVP analysis. And you are going to decide all of your decisions at once. No feeling your way through it this time. You are going to make all of your decisions now, for the next four years and just cruise through it this time.
    You analyze the results of your first set of decisions that you made in Time Warp 1, from 2012 to 2015 (Excel Spreadsheet attached). You have the data, you kept it all. But now you are going to use CVP analysis to help you determine your new strategy. And you have a tool to use, the CVP Calculator.

    You analyze the results using CVP and develop your complete four year strategy. You decide to make notes about your analysis and your reasoning process; just in case you have to do this again (You are praying that you can finally move ahead this time when you get to 2016.)

    You finish your report that shows your strategy that you are going to use these next four years during Time Warp 2. And stop and take a big breath before you move ahead into 2012.

    Do not run the simulation. You develop a revised strategy and make a case for this new strategy using analysis and relevant theories.
    The key aspects of this assignment that should be covered and taken into account in preparing your paper include:
    The revised strategy consists of the Prices, R&D Allocation %, and any product discontinuations for the X5, X6, and X7 PDAs for each of the four years: 2012, 2013, 2014, and 2015.

    You must present a rational justification for this strategy. In other words, you must Make a Case for your proposed strategy using financial analysis and relevant theories.

    Use the CVP Calculator and review the PowerPoint that explains CVP and provides some examples.

    You need to CRUNCH some numbers (CVP Analysis) to help you determine your prices and R&D allocations.

    Make sure your proposed changes in strategy are firmly based in this analysis of financial and market data and sound business principles.

    Present your analysis professionally making strategic use of tables, charts and graphs.

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    Solution Preview

    Introduction & Corporate Strategy
    Tablet Development Corporation (TDC) offers three different products?the budget conscious X5, the performance focused X6, and the balanced X7. In order to be successful, TDC has aggressively segmented the target market, while retaining enough product flexibility to respond to rapid changes in the aggregate tablet market. The levers used to respond to said changes are product price, and research & development investment. Considering R&D investment as part of a product?s fixed cost?the simplest tool to apply to the pricing question becomes the application of contribution margin to a cost, volume, profit analysis, (Accounting for Management, n.d.). The following report will project cost and R&D investment decisions to TDC?s three main products through 2015.
    While CVP offers a simple tool to illustrate the mathematics of product profitability, there are a few assumptions that must be stated up front. First and foremost, the market research accomplished in support of the corporate strategy must be sound. The size and composition of a future market must be at least somewhat known?and some degree of accuracy must be assumed on the part of TDC?s ability to penetrate this market. Otherwise, there is no starting point from which to depart with CVP. Additionally, CVP assumes no price elasticity in the market?an absurd assumption by any reckoning. Each TDC product exhibits differing price elasticity as well as market response to performance. These factors will be examined individually for each product.
    The X5 begins 2012 enjoying significant growth from the year prior. It is an established product in an emerging market and as such, is attractive to liberal consumers. Liberal decision makers are ?regularly looking for new solutions, willing to make changes? if the benefit can be shown,? (Center for Business Planning, 1994). The X5 targets these early adopters? budget as the vehicle for illustrating the benefits of a tablet computer. As such, X5 demand is extremely elastic in relation to price. Alternatively, such a focus does not require much research and development into performance?as the target market segment is more concerned with price point than performance. For this reason, X5 technology will not receive further R&D investment, rather the X5 will be marketed as a complete offering, with little room for growth in the ...

    Solution Summary

    5 pages. APA format with references.