project 5

Follow the instructions for Project 5 below. The example included is based on the scenario example for a nonprofit event that we used in our notes for CH15. You will recognize the numbers! You may make up any numbers for your Project 4 – just don’t use my numbers!

Project 5 – 35 points
ACTG3000
For this project, you will create a scenario for a business or other organization and use
CVP analysis to show the following:
1. Breakeven in units
2. Breakeven in dollars
3. Target sales in units for achieving a $50,000 target NI
4. Target sales in dollars for achieving a $50,000 target NI
5. You realize that your scenario’s actual capacity is limited to its breakeven
number of units (BEu, as calculated in #1 above). Calculate what the new sales
price (SP) should be in order to achieve a $10,000 NI using the BEu (#1 above)
for sales volume (Q).
6. Same as #5, except this time calculate what the new variable cost per unit (VC)
would need to be in order to achieve a $10,000 NI using the BEu (#1 above) for
sales volume (Q).
Requirements:
A. Define each CVP variable for your scenario:
SP =
VC =
FC =
B. Calculate:
CM per unit =
CM ratio =
C. Calculate #1 – 6 above, showing all calculations
Sensitivity Analysis: Example
• How will the lower sale price affect the
breakeven point?
– Original SP per unit was $200; BE was 100 events
– Lower price yields higher unit sales to breakeven
– Higher prices yields lower unit sales to breakeven
Sensitivity Analysis: Example
• How will increased costs affect the breakeven
point?
– Original VC per unit was $80; BE was 100 events
– Higher cost yields higher unit sales to breakeven
– Lower cost yields lower unit sales to breakeven
2
Sensitivity Analysis: Example
• How will the increased fixed costs affect the
breakeven point?
– Original FC were $12,000; BE was 100 events
– Higher fixed costs yields higher unit sales to
breakeven
– Lower fixed costs yields lower unit sales to
breakeven