In each of the following cases, calculate the accounting break-even and the cash break-even points. Ignore any tax effects in ca
1 answer:
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Answer:
(a) : Profit = Selling price -purchase cost - labour cost -transportation cost
Profit per unit for the base-case = 45 - 11 - 24 - 3 = $ 7 / unit
Profit per unit for the worst-case = 45 - 12 - 25 - 5 = $ 3/ unit
Profit per unit for the best-case = 45 - 10 - 20 - 3 = $ 12 / unit
b) based on simulation model mean profit = 45 - 11 - 24 - 5 = $ 5/ unit and 45 - 10 - 25 - 3 = $ 7 / unit
(c) : Simulation approach will provide a distribution of the profit per unit values. By calculating percentage of simulation trials provide us profit in what-if scenario.
d) As evaluated above, based on simulation model, minimum profit is $ 5/ unit. Hence management's belief of non-sustainability of project is right. Less than $ 5 / unit profit scenario is unacceptably low.
Explanation:
simulaton model for b is in the attachment below.
