Golden Star Winery produces midlevel wines consumed primarily in North America. Given below is the projected income statement for the company for 2011.

 

 

 

Projected Income Statement (2011)  Sales (100,000 cases at $7 per case)

 

 

 

$700,000

 

 Cost of goods sold:

 

 

 

 

 

 Materials

 

$180,000

 

 

 

 Labor

 

$225,000

 

 

 

 Fixed manufacturing expenses

 

$45,000

 

 

 

 

 

 

 

 

 

 Administrative and selling expenses:

 

 

 

 

 

 Delivery

 

$30,000

 

 

 

 Commissions

 

$50,000

 

 

 

 Advertising

 

$10,000

 

 

 

 Travel

 

$5,000

 

 

 

 Fixed administrative and selling expenses

 

$15,000

 

 

 

 Total expenses

 

 

 

$560,000

 

 Net income before taxes

 

 

 

$140,000

 

Create a report answering the following questions:

 

  • Complete the following table in a fully functional Microsoft Excel spreadsheet.

 

Price

Quantity

Total Revenue

Total Variable Cost

Total Fixed Cost

Total Cost

Profit

$8.00

65,000

 

 

 

 

 

$7.75

75,000

 

 

 

 

 

$7.50

80,000

 

 

 

 

 

$7.25

90,000

 

 

 

 

 

$7.00

100,000

 

 

 

 

 

$6.75

115,000

 

 

 

 

 

$6.50

120,000

 

 

 

 

 

 

 

 

  • Using Excel, prepare a graph showing the breakeven point and any profit or loss at the current price of $7. Explain to the Golden Star management the implications of this analysis.
  • What is the elasticity coefficient for each price between $6.50 and $7.50? Is the demand elastic or inelastic at these points? How can this information be useful to management in its pricing and output decisions?
  • On the basis of your calculations and the information above, what recommendations would you make to Golden Star in terms of price and output levels?
  • Using Excel Format ONly Please

 

    • Posted: 7 years ago
    Golden Star

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