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Answered: - Computer Graphics (CG) is a small manufacturer of electronic


At the bottom of the attached problem, the professor wants us to create a data table to represent sensitivity analysis.? Are you able to provide guidance on how this should be setup?


Computer Graphics (CG) is a small manufacturer of electronic products for computers with graphics capabilities. The company has succeeded by being very innovative in product design. As a spin-off of a large electronics manufacturer (ElecTech), CG management has extensive experience in both marketing and manufacturing in

 


 

CG?s main product is a circuit board (CB3668) used in computers with enhanced graphics capabilities. Prices vary depending on the terms of sale and the size of the purchase; the average price for CB3668 is $95.90. If the firm is able to take off, it might be able to raise prices, but it might have to reduce the price because of incre

 

to sell 120,000 units in the coming year, and sales are expected to increase in the following years. The future for CG looks very bright indeed, but it is new and has not developed a strong financial base. Cash flow management is a critical feature of the firm?s financial management, and top management must watch cash flow num

 

At present, CG is manufacturing the CB3668 in a plant leased from ElecTech using some equipment purchased from ElecTech. CG manufactures about 70 percent of the parts in this circuit board.

 


 

CG management is considering a significant reengineering project to significantly change the plant and manufacturing process. The project?s objective is to increase the number of purchased parts (to about 55 percent) and to reduce the complexity of the manufacturing process. This would also permit CG to remove some lease

 

most expensive equipment in the plant. The per unit manufacturing costs for 120,000 units of CB3668 follow.

 

General, selling, and administrative costs are $9.97 variable cost per unit and $1,227,000 fixed; these costs are not expected to differ for either the current or the proposed manufacturing plan.

 

Data

 

Expected selling price per unit

 

Expected sales volume (in units)

 


 

$95.90

 

120,000

 


 

Materials and purchased parts

 

Direct labor

 

Variable overhead

 

Fixed overhead

 

Manufacturing information for CB3668:

 

Number of setups

 

Batch size

 

Cost per setup

 

Machine hours

 

General, Selling, and Administrative (GSA) Costs:

 

Variable cost (per unit sold)

 

Fixed (per year)

 


 

Per-Unit Costs at Above Volume

 

Current

 

Proposed

 

$6.01

 

$15.17

 

$12.29

 

$14.29

 

$23.60

 

$31.25

 

$50.27

 

$25.13

 

2,500

 

48

 

$296

 

83,400

 


 

2,000

 

60

 

$296

 

56,300

 

$9.97

 

$1,227,000

 


 

$10.23

 


 

1. Breakeven points (in units)

 

Current

 

Per Unit

 

Units - breakeven units - use GoalSeek

 

Selling price per unit

 

Total Revenue

 

Variable Costs

 

Unit level costs

 

Materials and purchased parts

 

Direct labor

 

Variable overhead

 

Variable SG&A costs

 

Total Variable cost per unit

 

Batch level costs

 

Setup

 

Number of setups

 

Cost

 

Total Variable Costs

 

CM per unit

 

Total Fixed Cost:

 

Fixed SG&A

 

Fixed manufacturing:

 

Fixed cost/unit

 

# of units

 

Total

 

Total Fixed Cost per Year

 


 

Total

 

191,731

 


 

$95.90

 


 

Proposed

 

Per Unit

 

$95.90

 


 

$18,387,012

 


 

$6.01

 

$12.29

 

$23.60

 

$9.97

 

$51.87

 


 

$6.17

 

$58.04

 

$37.86

 


 

Total

 

209,138

 

$20,056,318

 


 

$15.17

 

$14.29

 

$31.25

 

$9.97

 

$70.68

 


 

3,995

 

$1,182,520

 


 

$4.93

 


 

3,486

 

$1,031,856

 


 

$7,259,400

 


 

$75.61

 

$20.29

 


 

$4,242,600

 


 

$1,227,000

 

$50.27

 

120,000

 


 

$1,227,000

 

$25.13

 

120,000

 


 

$6,032,400

 

$7,259,400

 

$0

 


 

Operating Income

 


 

$3,015,600

 

$4,242,600

 

$0

 


 

2. Indifference Point: The indifference point in volume, Q, is defined as the point where operating income is the same under both plans. Since total revenue is assumed not to vary by choice of production plan, this is operating profit equality is achieved when the total relevant cost is the same for each decision alternative.

 

Total Relevant Cost, Current Plan = Total Relevant Cost, Proposed Plan

 

Indifference point

 

396,600 Use GoalSeek

 

Current

 

Per Unit

 

Units

 

Selling price per unit

 

Total Revenue

 


 

Total

 

396,600

 


 

$95.90

 


 

Proposed

 

Per Unit

 


 

Total

 

396,600

 


 

$95.90

 

$38,033,940

 


 

$38,033,940

 


 

Variable Costs

 

Unit level costs

 

Materials and purchased parts

 

Direct labor

 

Variable overhead

 

Variable SG&A costs

 

Total Variable cost per unit

 


 

$6.01

 

$12.29

 

$23.60

 

$9.97

 

$51.87

 


 

Batch level costs

 

Setup

 

Number of setups

 

Cost

 


 

$15.17

 

$14.29

 

$31.25

 

$0.00

 

$60.71

 


 

$6.17

 


 

Total Fixed Cost:

 

Fixed SG&A

 

Fixed manufacturing:

 

Fixed cost/unit

 

# of units

 

Total

 

Total Fixed Cost per Year

 


 

$4.93

 


 

6,611

 

$1,956,856

 


 

$58.04

 

$37.86

 


 

Total Variable Costs

 

CM per unit

 


 

8,263

 

$2,445,848

 


 

$15,016,450

 


 

$65.64

 

$30.26

 


 

$11,999,498

 


 

$1,227,000

 

$50.27

 

120,000

 


 

$1,227,000

 

$25.13

 

120,000

 


 

$6,032,400

 

$7,259,400

 


 

Operating Income

 


 

$3,015,600

 

$4,242,600

 


 

$7,757,050

 


 

$7,756,898

 


 

Difference

 

$152

 


 

3. Sensitivity analysis: since uncertainty is important in this case, CG Graphics could use a spreadsheet analysis as illustrated below. Note that the current method looks good if projected demand rises. This is a direct result of increased operating leverage associated with the current method.

 

Current

 

Per Unit

 

Units

 

Selling price per unit

 

Total Revenue

 


 

Total

 

120,000

 


 

$95.90

 


 

Proposed

 

Per Unit

 

$95.90

 


 

$11,508,000

 


 

Variable Costs

 

Unit level costs

 

Materials and purchased parts

 

Direct labor

 

Variable overhead

 

Variable SG&A costs

 

Total Variable cost per unit

 


 

$6.01

 

$12.29

 

$23.60

 

$9.97

 

$51.87

 


 

Batch level costs

 

Setup

 

Number of setups

 

Cost

 


 

$6.17

 


 

Total Variable Costs

 

CM per unit

 


 

$58.04

 

$37.86

 


 

Total Fixed Cost:

 

Fixed SG&A

 

Fixed manufacturing:

 

Fixed cost/unit

 

# of units

 

Total

 

Total Fixed Cost per Year

 


 

Total

 

120,000

 

$11,508,000

 


 

$15.17

 

$14.29

 

$31.25

 

$9.97

 

$70.68

 


 

2,500

 

$740,000

 


 

$4.93

 


 

2,000

 

$592,000

 


 

$4,543,600

 


 

$75.61

 

$20.29

 


 

$2,434,400

 


 

$1,227,000

 

$50.27

 

120,000

 


 

$1,227,000

 

$25.13

 

120,000

 


 

$6,032,400

 

$7,259,400

 

$2,715,800

 


 

Operating Income

 


 

$3,015,600

 

$4,242,600

 

$1,808,200

 


 

Data Table - refer to Data->What-If Analysis->Data Table

 

Operating Income Sensitivity Analysis

 

Levels of Demand

 


 

Current

 

$2,715,800

 


 

Proposed

 

$1,808,200

 


 

g in the electronics industry. A long list ofExcel Instructions

 


 

creased competition. The firm expects

 

numbers closely.

 


 

ased equipment and to sell some of the

 


 

Chart(s) - charts have many properties, you will set only the following properties.

 

Chart # 1

 

Name

 

Chart 1

 

ChartType

 

Location

 

ChartWidth

 

ChartHeight

 

Series

 

Name

 

XValues

 

Values

 

PlotOrder

 

Format.Line/Border.ForeColor:

 

Format.Fill.ForeColor:

 

ChartTitle

 

Caption

 

Font.Name

 

Font.Size

 

Font.Bold

 

ChartLegend

 

Position

 

Font.Name

 

Font.Size

 

Font.Bold

 

Axis - Horizontal

 

AxisTitle

 

AxisTickLabelsFormat

 

Axis - Vertical

 

AxisTitle

 

AxisTickLabelsFormat

 

ChartAreaColor

 

PlotAreaColor

 


 

Line

 

$J$140

 

8.25

 

4

 

Series 1

 

Current

 

$F$141:$F$158

 

$G$141:$G$158

 

Not this semester

 

Red 0, Green 176, Blue 240

 

N/A

 


 

Series 2

 

Proposed

 

$F$141:$F$158

 

$H$141:$H$158

 

Not this semester

 

Red 190, Green 75, Blue 72

 

N/A

 


 

Operating Income at Various Levels of Demand

 

Calibri

 

18

 

True

 

Below the chart

 

Calibri

 

10

 

False

 

Levels of Demand

 

#,##0_);[Red](#,##0)

 

Operating Income

 

$#,##0;[Red]$#,##0

 

Red 191, Green 191, Blue 191

 

Red 242, Green 242, Blue 242

 


 

 


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