Golden Star Winery produces midlevel wines consumed primarily in North America. Given below is the projected income statement for the company for 2011.
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Projected Income Statement (2011)
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Sales (100,000 cases at $7 per case)
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$700,000
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Cost of goods sold:
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Materials
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$180,000
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Labor
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$225,000
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Fixed manufacturing expenses
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$45,000
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Administrative and selling expenses:
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Delivery
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$30,000
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Commissions
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$50,000
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Advertising
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$10,000
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Travel
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$5,000
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Fixed administrative and selling expenses
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$15,000
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Total expenses
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$560,000
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Net income before taxes
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$140,000
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Create a report answering the following questions:
• Complete the following table in a fully functional Microsoft Excel spreadsheet.
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Price
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Quantity
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Total Revenue
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Total Variable Cost
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Total Fixed Cost
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Total Cost
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Profit
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$8.00
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65,000
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$7.75
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75,000
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$7.50
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80,000
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$7.25
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90,000
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$7.00
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100,000
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$6.75
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115,000
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$6.50
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120,000
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• Using Excel, prepare a graph showing the breakeven point and any profit or loss at the current price of $7. Explain to the Golden Star management the implications of this analysis.
• What is the elasticity coefficient for each price between $6.50 and $7.50? Is the demand elastic or inelastic at these points? How can this information be useful to management in its pricing and output decisions?
• On the basis of your calculations and the information above, what recommendations would you make to Golden Star in terms of price and output levels?
Create your report in a 2- to 3-page Word document. Create Excel sheet and report. APA, and cite all references. Also Include an Abstract, introduction, and conclusion.
Completed the given table using a fully functional Excel spreadsheet.
Prepared a graph showing the breakeven point and any profit or loss at the current price of $7 and explained to the Golden Star management the implications of this analysis.
Determined the elasticity coefficient for each price between $6.50 and $7.50, explained whether the demand is elastic or inelastic at these points, explained how this information can be useful to management in its pricing and output decisions, and provided recommendations to Golden Star in terms of price and output levels.