CVP Analysis
Last time, strategies were developed for the different products, the X5, X6 and X7. The strategies were based on cost-volume-profit analysis, the product life cycle and different pricing strategies. This report will highlight the results of those strategies, and explain why they occurred, based on the underlying theories. The X5 analysis showed that increasing the price would deliver lower sales volume, but higher overall profit. The same showed for the X6. With the X7 there was maybe not as much data. The elasticity was not known. But we do know the following about the X7: It is a low-priced good that was not selling well at $195. Thus, it stands to reason, even without knowing the elasticities, that the X7 will benefit from a lower selling price. The tactics are therefore
Year by Year Decisions: Pricing & R&D Allocations
PRODUCT
DECISION
2011
2012
2013
2014
2015
X5
Price
$285
$280
$280
$280
R&D %
33%
0%
0%
0%
0%
Discontinue?
NO
NO
NO
NO
YES
X6
Price
$420
$441
$441
$441
$441
R&D %
34%
40%
40%
40%
0%
Discontinue?
NO
NO
NO
NO
NO
X7
Price
$195
$165
$165
$165
$165
R&D %
33%
60%
60%
60%
Discontinue?
NO
NO
NO
NO
NO
Report on Results
Cumulative Profit
2011
$81,571,138
2012
$361,796,857
2013
$849,408,401
2014
$1,372,679,239
2015
$1,612,592,251
The table above shows that the organization fared better under the new calculations. There are a few different explanations for this. In 2012 and 2013, the X5 and X6 were at growth stages of the product life cycle and were the major drivers of profit. The X7 was actually losing money...
Tablet SIM II The analysis that was conducted revealed a few recommendations for Clipboard Tablet Company that were different from the company's choices under the Joe Schmoe regime. With the opportunity having presented itself to take the company in a different path, the following strategy was enacted: Discontinued The results of this strategy were as follows. For the X5: X5 Profit 151,182,710 83,101,400 X5 Saturation X6 Profit 240,511,901 307,464,930 137,132,198 103,417,497 X6 Saturation X7 Profit -10,298,475 24,820,249 93,863,284 X7 Saturation Cumulative Profit 672,971,018 1,088,357,597 1,325,384,992 1,641,496,441 These figures indicate that the performance was better
Tablet SIM Joe Schmoe's performance was not optimal, and there are a few different changes that can be made. In order to understand the flaws in Joe's performance, it is necessary to understand some key business concepts. The first of these is profitability, in particular the concept of contribution. This is important to the analysis for a couple of reasons. The first is that the X5 product lost money in its final
Tablet SIM III The results of the last analysis were promising, but ultimately there are strict limitations as to the usefulness of cost-volume-profit analysis. With the X5, the results were successful for the most part, and the X6 also sold to saturation. The X7 sold nowhere near saturation, and therefore money was left on the table. This is where the bulk of the analysis will be conducted. A few extra dollars can
profit analysis was introduced, but the execution was lacking. One of the important factors is that CVP analysis requires a number of data points so that the elasticities of demand for the product can be determined. There is still going to be the wild card of R&D investment, but setting prices is an important determinant of demand. Working on theory rather than data last time, the results were perhaps
Eve celebration. You finished analyzing performance Tablet Development a great report turned a days early Sally Smothers. At the new beginning of 2012, decisions are made at three specific levels: Research and development allocations Product pricing, and Potential product discontinuation. The advantage at this stage is that the future evolution of the market is already known and safer decisions can be made. In such a context then, the main decisions include the following: The
Strategic Review Mr. Schmoe's performance over the past four years has been quite poor. Essentially, Mr. Schmoe made no changes to the strategy, and while that worked initially, the company's performance has deteriorated, and is at present in a bad state, where our best products are entering decline and we have no new products in the pipeline, as we still have older models on the market that are making no money.
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