Option #1: Cost-Volume-Profit Analysis

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Option #1: Cost-Volume-Profit Analysis

Steve Smith has completed a forecast of cost volume profit analysis for the Swiss Chocolate Manufacturing Company’s U.S. division manufacturing plant for the coming year. Smith notes the decline in volumes, prepares the breakeven analysis, and computes the margin of safety. Moreover, he notes that the current production volume projections indicate that the margin of safety will be positive for the period. However, the company will not achieve the sales volume required to achieve its desired level of operating and net income. In addition, the degree of operating leverage is high. The vice president of operations has tasked Rick White with suggesting some cost savings.

In a 3- to 4-page, well-written paper demonstrating CSU-Global standards, discuss the following:

  1. Given the fact pattern above, identify whether White should seek reductions in variable or fixed costs for the greatest impact on the forecast.
  2. What types of costs might Rick suggest for potential savings based on your answer? Name three costs which could be addressed, and rationalize your response.
  3. What parts of the value chain might be negatively impacted by Rick’s decision in the current period? How will this affect the company in the future? Name three ways the company may be impacted by the decision to cut costs.

In your analysis, include the following:

  1. An introduction
  2. Requirements 1 – 3
  3. Conclusion

Your paper should meet the following requirements:

  • 3-4 pages in length (required number of pages does not include the title page and the reference page)
  • Formatted according to CSU-Global standards
  • Include at least three outside sources
 
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