[Ryhaan]

CVP and comprehensive activity-based analysis:
Manufacturer
Plzzz help

Cool Camping Company is a major manufacturer of tents, which are sold
Directly to discount department stores and camping equipment suppliers. The
Company has recently introduced activity based costing and the following
Activities and costs have been identified.
Activity Level of activity Planned costs
Production costs:
Production and process Product $50,000 per product
Design

Moving materials to Batch $100 per batch
Cutting area

Setting up pattern cutting Batch $250 per batch
Machines

Moving materials to
Sewing area Batch $120 per batch

Setting up sewing
Machines Batch $180 per batch

Cutting pattern Unit $15 per unit

Stitching Unit $45 per unit

Waterproofing seams Unit $10 per unit

Inspection Unit $11 per unit

Packaging Unit $4 per unit

Customer related costs:
Processing customer Order $70 per order
Order

Delivering the product Order $140 per order

Sales calls Customer $150 per customer

Handling customer
Complaints Customer $75 per customer

Advertising in retail Market $24,000
Trade magazines

Other costs
Administration Facility $220,000


The company expects to manufacture and sell 75,000 tents next year, at a
Selling price of $205 each. It is estimated that this will involve producing 1,875
Batches of tents for 185 customers, who will place a total of 3,750 orders during
The year. The direct material cost per tent is estimated to be $70.
Required:
1. Use a spreadsheet to develop a profit model for Cool Camping
Company and estimate the planned level of profit.

2. Use your profit model to estimate how many tents the company
Would need to break even.

3. Use your profit model to estimate how many tents the company
Would need to sell to make a profit of $950,000.

4. Estimate the company’s safety margin and explain the significance
Of this information to the company’s management.

5. The company’s marketing department has forecast that sales could
Be increased by 10,000 units, if the selling price was decreased by
$15 per unit and by 20,000 units if the selling price was decreased
By $10 per unit. Use your profit model to assess the effects of these
Changes. The number of batches produced and customers’ orders
Placed will increase proportionately, but the number of customers
Will remain unchanged at 185.

6. The marketing manager has recommended that the company cease
Trading with camping equipment suppliers and concentrate on the
Discount department store market. It is estimated that this will
Decrease sales by 15,000 tents, reduce the number of customers by
11 and the number of order by 2,700. Production will be based on
The same batch size as currently used. Use your profit model to
Assess the effects of these changes.

7. Write a report to the company’s management explaining the profit
Implications of the initial forecast level of activity and
Recommending whether the company should:
a. Decrease its selling price and if so, by how much
b. Cease trading with camping equipment suppliers

[paraclete]

We don't provide model answers what is your question