Assignment: WK 4 Business Brief
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Assignment: WK 4 Business Brief
Please write about the number (1) in action items which include three points (A-B-C) at below according to Case or Problem in this assignment. Also, covers each point in rubric because is very important to I get the high degree. In addition, using business brief format. (Please find attached). Review all reading material and activities relevant to the problem-solving application associated with the Business Brief Problem below. (Please refer to the Problem at below )
action items
1) – Write two-pages analysis Write a one-page analysis according to the Business Brief Guidelines. Complete sentences must be used (bullets are not acceptable). Your analysis must be written using a concise writing style. Your Business Brief should incorporate all of following instructions:
a. An opening paragraph briefly introducing the problem situation.
b. Analysis header – The analytical section should include a discussion of the problem results as identified in the problem requirements.
c. Conclusion header – This section should be based on the analytical requirement(s) that solicit your opinion regarding the problem. You should provide only key, relevant information and logical discussion in support of your opinion.
d. APA citation(s) and reference(s).
Problem or Case
McKnight Company sells flags with team logos. McKnight has fixed costs of $639600 per year plus variable costs of $4.20 per flag. Each flag sells for $ 12.00.
Requirements:
1. Use the equation approach to compute the number of flags McKnight must sell each year to break even.
2. Use the contribution margin ratio approach to compute the dollar sales McKnight needs to earn $32500 in operating income for 2016. (Round the contribution margin ratio to two decimal places.)
3. Prepare McKnight’s contribution margin income statement for the year ended December 31, 2016 for sales of 70000 flags. (Round your final answers up to the next whole number.)
4. The company is considering an expansion that will increase fixed costs by 23% and variable costs by $0.60 per flag. Compute the new breakeven point in units and in dollars. Should McKnight undertake the expansion? Give your reasoning. (Round your final answers up to the next whole number.)
Requirement 1.
First, select the formula to compute the required sales in units to break even.
Net Sales revenue – Variable Costs – Fixed Costs = Target profit
Rearrange the formula you determined above and compute the required number of flags to break even.
The number of flags McKnight must sell each year to break even is 82000
Requirement 2.
Begin by showing the formula and then entering the amounts to calculate the required sales dollars to earn $32500 in operating income. (Round the required sales in dollars up to the nearest whole dollar. For example, $10.25 would be rounded to $11. Abbreviation used: CM = contribution margin.)
( Fixed Costs + Target profit ) ÷ CM ratio = required sales in dollars
( 639000 + 32500 ) 65% = 1034000
Requirement 3. Prepare McKnight’s contribution margin income statement for the year ended December 31, 2016 for sales 70000 flags. (Round your final answers up to the next whole number.) (Use parentheses or a minus sign for an operating loss.)
McKnight Company contribution margin income statement for the year ended December 31, 2016
Sales revenue $840000
Variable Costs 294000
Contribution margin 546000
Fixed Costs 639600
Operating income (loss) (-936000)
Requirement 4. Begin by selecting the formula to compute the required sales in units to break even under the expansion plan.
Net Sales revenue – Variable Costs – Fixed Costs = Target profit
Rearrange the formula you determined above and compute the required number of flags to break even under the expansion plan.
• Under the expansion plan, the breakeven point in units would be 109265 flags.
• Under the expansion plan, the breakeven point in dollars would be $1311180.
• Should McKnight undertake the expansion? Give your reasoning.
McKnight should only undertake the expansion if expected profits from the expansion are greater than the expected costs.
