I need help solving my spreadsheet and questions

2

>Sheet

1

Maximization has been populated in Cells A to H of Q 1. Assuming the company operates

months of the year convert the information from Project 2 to annual information for both Standard and Deluxe Boxes.

22

( obtain from Project 2)

12

Boxes sold per month in millions

/unit

VC

Costs (FC+VC)

(millions)

0.00

$ 10.00

0.00

$ 50.00

20.00

$ 600.00

0

6

0

$ – 0

0

$ – 0

7

$ – 0

$ – 0

8

.60

$ – 0

$ – 0

9

.80

$ – 0

$ – 0

10

$ – 0

$ – 0

11

$ – 0

$ – 0

12

$ – 0

$ – 0

.60

$ – 0

$ – 0

$ – 0

12

Price

Annual Revenue (millions) Annual VC (millions) Annual FC (millions) Annual Total Costs (millions)

1

$ 30.00

1.2

1.5

1.6

2

$ 22.00

$ 47.30

$ 47.25

and 1.5 Million Deluxe Boxes per month. With environmental concerns over the use of the materials and techniques to make the Deluxe Boxes the company director is concerned over its longterm feasibility. The marketing manager is convinced that under the current cost allocation Deluxe boxes is the highest contributor to company gross profit. How much profit is made on each product ? Also calculate the Gross Profit percentage for each product. HINT Use the annual information calculated in

to complete Question 2. Complete the grey spaces

Standard Boxes Deluxe Boxes Total

per month )

9

10.5

18

$ (in millions) $ (in millions)

Revenue
Profit

																																																																																																																																																																																																																											In this Project you will analyse managerial and costing information to improve the company’s EBITDA. You will use what you have learned about cost behavior and apply activity-based costing and cost-volume-profit analysis to make recommendations about LGI’s operational productivity. Use Information you calculated in project 2 Tab 3			Profit				12	1	10
			Question 1
Profit Maximization Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper		Standard Boxes
	Quantity		Price		Revenue			VC	FC / per month (millions)						Total	Daily profit (revenue -all costs)		Annual Revenue (millions)		Annual VC (millions)		Annual FC (millions)		Annual	Total Costs	Annual Profit
5		$ 22.00	$	11		$ 10.00		$ 50.00	$	6	$ 1,320.00		$ 600.00	$ 120.00	$	7
5.5	$ 2	1.6																			$ – 0
$ 2	1.2
6.5	$ 20.	8
$ 20.40
7.5	$ 20.00
$ 1			9
8.5	$ 19.20
$				18
9.5	$ 18.40
$	18.00
		10.5	$ 17.60
$ 17.20
1		1.5	$ 16.80
$ 16.40
12.5	$ 16.00
13	$	15
13.5	$ 15.20
14	$ 14.80
Profit Maximization			Deluxe Boxes
Deluxe boxes sold per month (millions)	Revenue (price x volume)	Variable Cost per standard box	Variable Cost (cost per unit x volume)	Fixed cost per month (millions)	Total Cost (Fixed + Variable)	Daily Profit (revenue – all costs)	Annual Profit (millions)
	$ 30.00
$ 29.50	$ 35.40
1.35	$ 29.00	$ 39.15
$ 28.50	$ 42.75
1.55	$ 28.00	$ 43.40
$ 27.50	$ 44.00
1.65	$ 27.00	$ 44.55
1.7	$ 26.50	$ 45.05
1.75	$ 26.00	$ 45.50
1.8	$ 25.50	$ 45.90
1.85	$ 25.00	$ 46.25
1.9	$ 24.50	$ 46.55
1.95	$ 24.00	$ 46.80
$ 23.50	$ 47.00
2.05	$ 23.00	$ 47.15
2.1	$ 22.50		$ 47.25
2.15		$ 47.30
2.2	$ 21.50
2.25	$ 21.00
	Question 2
The Company currently operates by selling 9 Million	Standard Boxes	Question 1
Number Of Boxes (in		Millions	1,5
Volume per year ( millions)			108		126
		$ (in millions)
	Less:	Variable Costs
Marginal				Contribution
	Less:			Fixed Costs
		Profit	%

Sheet2

Question 1
Standard Boxes Deluxe Boxes Total

9 1.5 10.5

108 18 126

Millions Millions

A new intern at the company believes that fixed cost based and allocated on a daily basis is incorrect and suggests allocating the Fixed Costs between Standard and Deluxe Boxes Based on the number of boxes sold. How much costs are allocated to each product based on the method suggested by the intern? To prove s/he point the intern also calculated the profit percentage. Complete the grey spaces
Volumes (per Month)
Volumes per year ( millions)
Total Fixed Costs (Millions- from Tab1)
New Profit
			Sales
	Less VC
Contribution Margin
Less Fixed Costs
Operting Profit
Profit %

Sheet3

Question 1

below. How much overhead would be allocated to Standard and Deluxe Boxes ( in total and per unit) using this method? Show all supporting calculations. Complete the grey spaces

Table 1

of Drivers

1,000

Labour Hours

1,000.00 9,000.00

108 18

Question 1

Deluxe Boxes Deluxe Boxes Total

Less: Variable Costs

Contribution

Less: Fixed Costs
Profit
Profit %

LGI’s production managers recently attended a course at UMGC where they learned about ABC costing. They propose allocating the total fixed costs between Standard and Deluxe boxes based on this method . They collected information about the cost drivers and the break up of the total costs in	Table 1
Manufacturing overhead	$ Amount	Cost driver	Standard Box	Deluxe Box		Totals	Cost of	Deluxe Boxes	Cost of Deluxe Boxes	Total Cost Check (must agree to Column B7:B14)
Depreciation	$47.00	Square feet	7,000	80,000
Maintenance	$50.00	Direct	Labour Hours		1,000	9,000
Purchase order processing	$9	Number of purchases orders	500	4,500
Inspection	$34	Number of employees	6000
Indirect Materials	$5.00		1,000.00		9,000.00
Supervision	$7.00	#of inspections	200	800
Supplies	$4.00	Units manufactured
Total Allocated costs	$156.00
Number of boxes per year
Allocated Cost per Box
Sales

Sheet4

Question 1

Box.

Standard Boxes Sustainable Deluxe Total
Quantity

18.00

15

Sales

VC

Contribution

Fixed Costs

Profit

Question 2

%
Sales
Totals
Variable Costs
Total Costs

18

Total

Sales $ – 0
Less VC 12

Contribution
Fixed Costs

Profit %

Question 5

Contribution

Fixed Costs

The sustainability manager is concerned about the long term sustainability implications of Deluxe boxes on the environment and suggest changing to sustainable materials for the production of a	Sustainable Deluxe
If the company switches to their current quantity of Deluxe Boxes sold to Sustainable Deluxe Boxes there will be some cost implications.
The Sustainable Deluxe Boxes could be made cheaper, and the sustianability manager believes that the company could bring down the selling price to $15 per box which would entice current Deluxe Box customers to accept the switch over. The new Sustainable Deluxe Boxes will attract 60% of total fixed costs calculated for the Deluxe Boxes under the ABC method. The number of boxes sold will not be affected by this new selling price, as the company will in future have to do marketing to sell more boxes at the lower price. Calculate the new Gross profit and profit percentage. Complete the grey spaces
108.00	126.00
Sellin price per unit	$ 18.80
GP %
The manager is concerned about the massive reduction in profit from the Sustainable Deluxe Boxes but realizes that because of the change in materials, they will no longer be able to charge the price of $18 per box. The manager wants to achieve at least the same profit percentage for the deluxe boxes as they have on standard boxes. How much additional profit are they requiring? Complete the grey spaces.
Required profit	See Tab 3
Less: Existing profit	See Q 1 above
Equals: Difference in additional profit required
Question 3
Work out the percentage that they should mark up on the costs to achieve the same profit % as for the standard boxes. Complete the grey spaces
Less Required GP%
Equals: Mark up percentage on cost
Question 4
Use the percentage calculated in Question 3 to determine how much the company should charge per product to reach the same profit percentage as for the standard boxes . Assume the company can still sell the same quantity of the Sustainable Deluxe Boxes as for the Deluxe Boxes. Complete the grey spaces
Fixed Cost
Sales
Units sold
Sales Price per unit
	Question 5
Prove that your calculation in Q 4 is correct. Complete the grey boxes.
Proof:	Per Unit
Net Profit
The marketing manger is concerned that the change could havea significant impact on sales as ciustomers may see the sustaiable boxes as an inferiror product for which they still have to pay only a little bit less than the orginal price of the Deluxe Boxes. How many boxes would the company have to sell to break even on the new Sustainabale Deluxe Boxes based on the new selling price? Complete the grey boxes.
$ Totals
Selling price
Less: Variable costs
Breakeven Quantity
BreakEven Value