Case+1-Questions - 5 Assume that XX of the Company’s...

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Mini-Case Questions Case 1-Cost Analysis 1. Go to Corporation web site and click on the Investor Relations link. Select 2009 Annual Report. Print sufficient number of copies since all members of the group will need to utilize it for the mini cases. 2. Is the Company you picked a service company, a merchandiser, or a manufacturer? What financial statement/outside financial statement information supports your answer? 3. Using the various sections of the report including the “Management Discussion and Analysis” identify the costs the Company incurs in each element of the value chain. Identify any costs that may be related to non-value producing activities. 4. Analyze each major category of expense (you may utilize more than one reporting period) and identify them as fixed, variable or mixed explaining how you reached your conclusion. State your relevant range assumptions.
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Unformatted text preview: 5. Assume that XX% of the Company’s operating expenses is fixed. What is the trend in the contribution margin ration over the last three years? What is the trend in the breakeven point for operations measured in sales dollars over the last three years? What is the trend in the margin of safety? 6. How would the results change if the proportion of operating expenses that are fixed increases to XX%? If the proportion of operating expenses that are fixed falls to XX%? 7. Assuming that fixed costs remain unaffected, how would operating income change if sales decline by 10%? How would operating income change if sales increase by 10%? 8. Prepare a memo to the CEO interpreting the results of the analyses, including a CVP chart for the most recent year. Discuss your key assumptions and the importance of those assumptions to the analysis....
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