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Cost Accounting Excel CVP Modeling and Analysis

Project: CVP Modeling and Analysis

The purpose of this project is to give you experience creating a multiproduct profitability analysis that can be used to determine the effects of changing business conditions on the client’s financial position.

Your goal will be to use Excel in such a way that changes to the assumptions will correctly ripple through the entire profitability analysis.

Business Description

The Stackpole Company retails two products, a standard and deluxe version of a luggage carrier.

The standard carrier sells for $28, has variable costs of $18, and direct fixed costs of $1,000,000.  The deluxe model sells for $50, has variable costs of $30, and direct fixed costs of $1,000,000.  The company has common fixed costs of $250,000.  The anticipated sales mix for the company is 3:1 or 75/25.


You have been hired to build a CVP model to help the company understand the impact of business conditions on operating income

Your model should include breakeven in units with a pro forma income statement, units sales for a target income of $250,000 with a pro forma income statement, an income statement reflecting actual current sales, margin of safety in dollars and %, and degree of operating leverage.

Your model should have the capability of computing B/E, target income, MOS, DOL, and predicting change in income based on a change in sales.  Create a dashboard to show the these variables. 

Once you have built the model, use the model to determine changes to the dashboard variables.  In a report to me, your CEO, show the original variables, the changed variables and explain why the change occurred.

  1. Sales mix changes to 25/75
  2. Common fixed costs increase by $100,000
  3. Reduce VC of the standard carrier to $10 per unit

Spreadsheet competencies

How to Design a Spreadsheet Model:

  • Determine the objective
  • Determine what information is needed
  • Make sure you know how to solve the problem
  • Use Excel to model the objective, compute the solution, and display the results
  • Test your spreadsheet to ensure it meets the objective (use the chapter example)

Layout of the Spreadsheet:

  • Top-down; left-right
  • One workbook, if possible
  • Separate input and report areas
  • All changes should occur in the input area – not in the body of the spreadsheet where you compute the solution
  • All cells in the body of the spreadsheet should contain a reference, formula, or function
  • Display – layout in a manner that is easy to follow; format cells to clearly identify the contents as numbers, dollars and cents, etc….; include labels, headings, etc…
  • Include user instructions

Modeling and Analysis Competency Demonstration Project

Last Updated on November 24, 2019

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