Description
Prompt
Use information from Milestone One and the provided Milestone Two Market Research Data Appendix to conduct a cost-volume profit analysis. Complete the “Contribution Margin Analysis” and “Break-Even Analysis” tabs in the Project Workbook that you used for completing the Milestone One assignment.
Specifically, you must address the following rubric criteria:
Contribution Margin. Determine your contribution margin per unit in the “Contribution Margin Analysis” tab.
Choose a sales price for each product.
Calculate the contribution margin for each product based on your sales price and the variable cost for that product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
Break-Even Analysis. Use cost-volume-profit (CVP) analysis to determine your break-even points for achieving your target profits in the “Break-Even Analysis” tab.
Determine the break-even points for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
Determine break-even units for the suggested target profits for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
TABS: Contribution Margin Analysis and Break Even Analysis
Milestone Two: Market Research Data
You have conducted some market research for style and size of products you want to use to launch your business. The market research has indicated the following sales price ranges will be optimal for your area depending on style of products you choose to sell:
Collars
With pricing at $20 per collar, you can expect to sell 30 collars per day.
With pricing at $24 per collar, you can expect to sell 25 collars per day.
With pricing at $28 per collar, you can expect to sell 20 collars per day
Leashes
With pricing at $22 per leash, you can expect to sell 28 leashes per day.
With pricing at $26 per leash, you can expect to sell 23 leashes per day.
With pricing at $30 per leash, you can expect to sell 18 leashes per day.
Harnesses
With pricing at $25 per harness, you can expect to sell 25 harnesses per day.
With pricing at $30 per harness, you can expect to sell 22 harnesses per day.
With pricing at $35 per harness, you can expect to sell 20 harnesses per day.
Additionally, you will need to compare your break-even points for the following target profits for each area of your business to determine your prices:
Collars
Break-even
$300 target profit each month
$500 target profit each month
Leashes
Break-even
$400 target profit each month
$600 target profit each month
Harnesses
Break-even
$500 target profit each month
$650 target profit each month
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