- Create your own original EXCEL file with price and cost data from the case, separately showing all variable cost items (costs that vary with the number of units produced) all fixed cost items (costs that are incurred independent of the number of units produced) , and the client's current price per UNIT and number of UNITS sold.
- In the same Excel file, create a contribution income statement, using the format in the case, (i.e., showing price x units sold (revenue), variable costs x units sold (total variable costs), contribution per unit and total contribution; total fixed costs. income before and after-tax.
- Calculate break-even units at the current price
- Calculate the revenue required to meet income target after-tax (profit)
- First decision: Raise price? Calculate the price per unit needed to reach the required income target (keeping the current volume of units sold). Explain why this might or might not be a good choice.
- Second decision: Increase volume? Calculate the units to be sold (volume) under current pricing in order to reach target income. Explain why this might or might not be a good choice.
- Determine whether it is best to adjust price or volume in order to reach the client's target income Compare the options and explain the rationale for your choice
- Prepare a narrated Powerpoint presentation to your client, summarizing your findings, your comparative analysis, and your recommendations. The narration should thoroughly reflect the logic of your analysis and will be evaluated based on the quality of this “written” communication. (See the below instructions on how to prepare a narrated Powerpoint presentation. ( NOTE--JUST CREATE THE POWERPOINT WITH EXPLANATION. I WILL DO THE NARRATION).
Refer to the below PowerPoint, "Jewelry Case Hints" for specific guidance through your analysis.
Sample Solution