Bayview - report

INDEX

Executive Summary3

Background3

Recommending and justifying an becharm cost abridgment3

New income statement - plant-wide belt rate6

New income statement - plant-wide overhead rate7

Conclusion9

Appendix A: Income Statements supporting information10

Exhibit A: Sensitivity Analysis - building block and total theatrical role margins11

Exhibit B: Sensitivity Analysis - parcel margin and lower limits of end product12

Exhibit C: Sensitivity analysis - contribution margin and upper limits of production13

Exhibit D: Sensitivity analysis - hours of production14

Executive Summary

The object of this report is to:

*Build upon the results and calculations from our previous Bayview assignment and to create a production plan for the company, identifying the optimum production mix;

* exercise sensitivity analysis as appropriate to support forth production plans; and

*Produce analysis sufficient to justify our production plan.

Executive recommendation: Based on our assessment of costs and overheads, theme 4 recommends that Bayview manufacturing adopt the following production mix:

* crossing A: 80,000 units

*Product B: 41,333 units

*Product C: 50,000 units

Background

To hold back our recommendations, the historical data provided was analysed using solver as an optimizing tool. By providing solver the operational constraints of the company, it generated the optimal product mix. This analysis is contained in an associated excel spreadsheet (BayviewManufacturing_group4part2.



xls), however the key aspects of this document are attached as exhibits A, B, C & D. It is recommended that these exhibits be reviewed prior to review of our analysis, as they highlight the underlying assumptions adopted by Group 4.

Recommending and justifying an appropriate cost analysis

Our recommended levels of production are based upon the sensitivity analysis attached. We have concluded that contribution margins (and therefore profitability) is most delicate to changes in demand for products A and C. This means that changes to the production add up of these products impact the profitability of Bayview more than...

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