Case #1
C-V-P and BE analysis, multipleproduct
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VX1
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MX2
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NX3
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Sales volume (units)
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$100,000
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$200,000
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$400,000
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Unit selling price
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$1.65
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$1.50
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$0.85
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$VC unit
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$1.25
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$0.70
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$0.25
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NCP, Inc. is a manufacturer andseller of small, inexpensive plastic housings and connectors used by a varietyof small engine and controls device manufacturers. The CFO of NCP is concernedabout the profitability for one segment of their product line; in particularthree of NCP's most purchased plastic housings. These products are sold in avery competitive market, so the company has strong pricing pressure on theproduct lines.
The CFO is interested in abreak-even and segment analysis for these three products:
Additional data related tothese housings are as follows:
- Total fixed expenses are$400,000 per year
o $240,000 of these fixed expenses are common fixedexpenses consisting of administrative salaries, rent, and depreciation
- The company runs a leanmanufacturing system so there is no beginning or ending inventories, norwork-in-process inventory.
The CFO has asked for thefollowing:
1. A prepared contribution marginstatement for the overall product line comprised of the three products:
a.What is the break-even point is sales dollars?
b. What is the overallcontribution margin percentage for the product line?
2.What is the contribution margin (in $ and %) for each of the three products?
3.Given the current sales mix, what is the sales volume in units for each productat the overall break-even point?
4. An analysis of the fixedexpenses indicates that of the $400,000, $20,000 can be avoided if product VX1is dropped, $80,000 if MX2 is dropped, and $60,000 if NX3 is dropped.
a.Prepare a segment CM analysis statement showing the full product line and eachof the products:
b. What is the impact on netoperating income under each of the three options:
i.dropping VX1
ii. dropping MX2
Attached is the case file
- will need one Excel file to this assignment
- Correct accounting formats for statements/budgets are expected
- Formatting to include $ and % signs where indicated
- All statements and calculations to utlize Excel formula functions
- Format on printable pages, either portrait or landscape orientation
- Qualitative analysis, supported by your numerical analysis, is to be included in the spreadsheet.
- Prepare written analysis in Word