The Huron Corporation Company
The Huron Corporation Company
To: President of Huron Corporation
From: Poom Chaiareekij
Date: April 1st, 2012
Subject: Business Memorandum
Objectives
The objectives of this memo are to forecast what is going to happen if the management decides to do something to increase the company’s net income and what decision is the best for them in order to increase the profit margin.
Significances of sensitivity Analysis
Excel sheets, which comprised of cost of goods manufactured, cost of goods sold and income, are created. Therefore, we can see the whole procession of the outcomes. In addition, the spreadsheet is formula-driven; so that a variable changes the outcomes will change automatically.
Results and Interpretation
Original data: schedule of cost of goods manufactured, schedule of cost of goods sold, income statement, and sensitivity analysis (case1, case2, and case3).
Case1: This action indicates the effect of purchasing factory equipment, which will result in the increasing of annual depreciation by $20,000. As a result, the cost on factory equipment depreciation is increased from 60,000 to 80,000. Cost of Goods Sold is increased from 1,770,000 to 1,790,000, and the net income is reduced from 41,000 to 28,520
Case2: This action indicates the effect of renovation of factory building, which will result in the increasing of annual depreciation by $25,000. As a result, the cost on depreciation on factory building is increased from 125,000 to 150,000. Cost of Goods Sold is increased from 1,770,000 to 1,795,000, and the net income is reduced from 41,000 to 25,420
Case3: This action indicates the effect of reduction of number of production supervisors, which will result in an indirect cost saving of $35,000. As a result, the cost of indirect labor is decreased from 150,000 to 115,000. Cost of Goods Sold is decreased from 1,770,000 to 1,735,000, and the net income is gained from 41,000 to 62,620
Recommendations
Based on the three scenarios above, my
To: President of Huron Corporation
From: Poom Chaiareekij
Date: April 1st, 2012
Subject: Business Memorandum
Objectives
The objectives of this memo are to forecast what is going to happen if the management decides to do something to increase the company’s net income and what decision is the best for them in order to increase the profit margin.
Significances of sensitivity Analysis
Excel sheets, which comprised of cost of goods manufactured, cost of goods sold and income, are created. Therefore, we can see the whole procession of the outcomes. In addition, the spreadsheet is formula-driven; so that a variable changes the outcomes will change automatically.
Results and Interpretation
Original data: schedule of cost of goods manufactured, schedule of cost of goods sold, income statement, and sensitivity analysis (case1, case2, and case3).
Case1: This action indicates the effect of purchasing factory equipment, which will result in the increasing of annual depreciation by $20,000. As a result, the cost on factory equipment depreciation is increased from 60,000 to 80,000. Cost of Goods Sold is increased from 1,770,000 to 1,790,000, and the net income is reduced from 41,000 to 28,520
Case2: This action indicates the effect of renovation of factory building, which will result in the increasing of annual depreciation by $25,000. As a result, the cost on depreciation on factory building is increased from 125,000 to 150,000. Cost of Goods Sold is increased from 1,770,000 to 1,795,000, and the net income is reduced from 41,000 to 25,420
Case3: This action indicates the effect of reduction of number of production supervisors, which will result in an indirect cost saving of $35,000. As a result, the cost of indirect labor is decreased from 150,000 to 115,000. Cost of Goods Sold is decreased from 1,770,000 to 1,735,000, and the net income is gained from 41,000 to 62,620
Recommendations
Based on the three scenarios above, my