The condensed income statement for the Peri and Paul partnership for 2017 is as follows. PERI AND… 1 answer below »
The condensed income statement for the Peri and Paul partnership for 2017 is as follows. PERI AND PAUL COMPANY Income Statement For the Year Ended December 31, 2017 Sales (240,000 units) $1,200,000 Cost of goods sold 800,000 Gross profit 400,000 Operating expenses Selling $280,000 Administrative 150,000 430,000 Net loss $(30,000 ) A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 45% of the selling expenses are variable, and 45% of the administrative expenses are variable. (Round to nearest unit, dollar, and percentage, where necessary. Use the CVP income statement format in computing profits.) Compute the break-even point in total sales dollars and in units for 2017.
Break Even Point in Dollars= $1,283,824 Break Even Point in Units= 258,284 units
b) Peri has proposed a plan to get the partnership “out of the red” and improve its profitability. She feels that the quality of the product could be substantially improved by spending $0.25 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive pressures. Peri estimates that sales volume will increase by 25%. What effect would Peri’s plan have on the profits and the break-even point in dollars of the partnership?
Profit=$70500 Break Even Point= $1,364,063
c)Paul was a marketing major in college. He believes that sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Peri’s: (1) increase variable selling expenses to $0.57 per unit, (2) lower the selling price per unit by $0.25, and (3) increase fixed selling expenses by $40,000. Paul quoted an old marketing research report that said that sales volume would increase by 55% if these changes were made. What effect would Paul’s plan have on the profits and the break-even point in dollars of the partnership?
Profit=$ 61,100 Increase Break Even Point= $1,643,103 Increase
d) Which plan should be accepted?
Peri’s Plan should be accepted.
This problem assesses your ability to apply Cost-Volume-Profit (CVP) analysis in a real-life type of scenario. The first three parts of the problem assess your ability to apply the general CVP tools you have learned. The fourth part (part d.) of the problem assesses your ability to evaluate two different alternatives and make a knowledgeable choice is selecting the better alternative. Write a 500 word evaluation logically supporting your position.
Now, my question is: Can you please do an analysis(essay) on this question or else evaluate the question affirmativeley? I want to compare your analysis verses mine. 500 words min please.
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