It’s New Year’s day, 2010. You just had a great New Year’s Eve celebration, you finished analyzing the performance of Handheld and are ready to charge ahead into the future. As you turn on the TV and try to open your eyes, you notice something strange (again). The TV commentator is saying something about New Year’s Day, 2006. You have a sinking feeling, and sure enough, it’s back to 1/1/2006. You realize that you are in Time Warp 2.
This time you decide to do your decision making differently. You are going to use a technique that you became familiar with last year, CVP analysis. And you are going to decide all of your decisions at once. No feeling your way through it this time. You are going to make all of your decisions now, for the next four years and just cruise through it this time.
You analyze the results of your first set of decisions that you made in Time Warp 1, from 2006 to 2009. You have the data, you kept it all. But now you are going to use CVP analysis to help you determine your new strategy. And you have a tool to use, the CVP Calculator.
You analyze the results using CVP and develop your complete four year strategy. You decide to make notes about your analysis and your reasoning process, just in case you have to do this again (You are praying that you can finally move ahead this time when you get to 2010.)
You finish your report that shows your strategy that you are going to use these next four years during Time Warp 2. And stop and take a big breath before you move ahead into 2006.
(In other words – don’t run the simulation, yet. Just turn in this report.)
ASSIGNMENT: Review and analyze the results that you got in the previous paper (Time Warp 1 decisions) and develop a revised strategy. Write a report and make a case for this new strategy using analysis and relevant theories.
Paper Expectations: The revised strategy consists of the Prices, R&D Allocation %, and any product discontinuations for the X5, X6, and X7 PDAs for each of the four years: 2006, 2007, 2008, and 2009. You must present a rational justification for this strategy. In other words, you must Make a Case for your proposed strategy using financial analysis and relevant theories. Use the CVP Calculator and review the PowerPoint that explains CVP and provides some examples. You need to CRUNCH some numbers (CVP Analysis) to help you determine your prices and R&D allocations. Make sure your proposed changes in strategy are firmly based in this analysis of financial and market data and sound business principles. Present your analysis professionally making strategic use of tables, charts and graphs.
YOU MIGHT FIND THESE DOWNLOAD USEFUL:
Decision Matrix Table – Download this Word doc with a blank table you can use to show your proposed strategy decisions.
PowerPoint discussing CVP – provides a good overview of Cost Volume Profit analysis, the various equations that you can use, and how to use it. Some examples are provided showing how to use the CVP Calculator. http://forio.com/pdasim.htm
CVP Calculator – this an Excel-based calculator that you can use to determine prices, volumes, and profits. Keep in mind that it will tell you what NEED, but the market determines what you actually get.
Time Line Summary:
PAPER #1 (inserted in previous directions)
2009: 12/15 hired. 12/30 turned in first report to Sally a few days early. 12/31 – celebrated
PAPER #2 (inserted above)
Time Warp 1 begins: 1/1/2010 WARPS INTO 1/1/2006
You freak out, then realize you have to make decisions for 2006 – 2009, which you do.
12/31/2009 – you have gone through all four years, and you write your report to summarize how you did. You are hoping that you will wake up tomorrow and it will be 2010.
THIS PAPER….(PAPER #3)
Time Warp 2 begins: 1/1/2010 WARPS INTO 1/1/2006 (Again)
Now it’s 1/1/2006: you decide to use CVP analysis and develop a four year plan for your strategy. You analyze the results of your first decisions in Time Warp 1 and make notes. You use the CVP Calculator to help you develop your strategy and you make more notes explaining your logic and your analysis. Then you take a short breather before you start in again tomorrow.
Results of time wrap 1
According to Quintana (2002) CVP analysis is a tool used by managers to determine the relationship between costs, volume and profit that is made by an organization. This tool uses elements such as prices, sales volume, unit variable costs, fixed costs and the product mix of an organization. CVP analysis is applied in making decisions such as products to be manufactured in a specific time period, the policy to be adapted to price products, and the type of equipment to be acquired by an organization. The break-even point is used to determine the sales level such that no profit or loss is made.
The revised strategy consists of the Prices, R&D Allocation %, and any product discontinuations for the X5, X6, and X7 PDAs for each of the four years: 2006, 2007, 2008, and 2009. You must present a rational justification for this strategy. In other words, you must Make a Case for your proposed strategy using financial analysis and relevant theories. Use the CVP Calculator and review the PowerPoint that explains CVP and provides some examples. You need to CRUNCH some numbers (CVP Analysis) to help you determine your prices and R&D allocations. Make sure your proposed changes in strategy are firmly based in this analysis of financial and market data and sound business principles. Present your analysis professionally making strategic use of tables, charts and graphs.
Quintana, O. (2002). Cost-Volume-Profit Analysis. Retrieved 28 Sept. 2010 from: http://www.sba.pdx.edu/faculty/michaels/360/11ch03/
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