STRATEGIC CHOICES

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Wonder Company Simulation – CVP Analysis

Simulation

In Module 3, you will use CVP analysis to inform the pricing of your three products.

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SCENARIO CONTINUATION:

You have now completed SLP2, and the date is (once again) reset to January 15, 2017.

You turn on the TV. The local television news anchor is talking about events that occurred on January 1, 2013.

Your decision-making process will be different this time, as you will be using CVP analysis, a technique with which you recently became familiar.

You analyze the results of the decisions you made in SLP2. But this time, you aim to improve your Final Total Score by using the CVP Calculator to help you determine a new and improved strategy.

You analyze your SLP2 results using CVP and develop your complete four-year strategy, again taking notes, documenting your reasoning.

You finish the report that shows your revised strategy for the next four years.

Do not run the simulation yet. Simply turn in your written report.

Session Long Project

Write a 6- to 7-page paper, not including cover and reference pages, in which you use the results from SLP2 and CVP analysis to develop a revised strategy.

Keys to the Assignment

The key aspects of this assignment that should be covered and taken into account in preparing your paper include:

  1. The revised strategy consists of the Prices, R&D Allocation %, and any product discontinuations for the W1, W2, and W3 tablets for each of the four years: 2013, 2014, 2015, and 2016.
  2. You must present a rational justification for this strategy. In other words, you must provide clear and logical support for your proposed strategy using financial analysis and relevant business theories.
  3. Use the CVP Calculator and review the PowerPoint that explains CVP and provides some examples.
  4. You need to crunch some numbers (CVP Analysis) to help you determine your prices and R&D allocations.
  5. Make sure all of your proposed changes are firmly grounded in CVP analysis, on the financial and market data provided to you, and on sound business principles.
  6. Present your analysis professionally, making strategic use of tables, charts, and graphs.

Time Line Summary:

SLP1

  • 2016: Hired on December 31, 2016.
  • Turned first report in to Sally on January 15, 2017.

SLP2

  • Time Warp 1 begins: January 15, 2017. You are warped back to January 1, 2013.
  • You realize you have to make decisions for 2013 – 2016, which you do.
  • December 31, 2016 – You have gone through all four years, and you write your report to summarize how you did.

SLP3

  • Despite your efforts in SLP2, you are once again taken back to January 1, 2013. You decide to use CVP analysis to revise the four-year plan you developed in SLP2. You analyze the results of your decisions from SLP2, taking detailed notes. You use the CVP Calculator to help develop your revised strategy, taking additional notes explaining the logic of your decisions.

SLP Assignment Expectations

Your paper will be evaluated using the grading rubric.

Tips and Suggestions

Please note the following tips and suggestions:

You might find these downloads and readings useful:

Irfanullah, J. (2013). Cost-Volume-Profit Analysis. Accounting Explained. Retrieved from http://accountingexplained.com/managerial/cvp-analysis/

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.

CVP Calculator – This is 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.

  • Include a cover page and reference page, in addition to the 6-7 pages of analysis described above.
  • Use section headings as appropriate. Use graphs, charts, or figures strategically – but not as “space fillers.”
  • Cite and reference all sources that you use in your work, including those that you paraphrase. This means include citations and quotation marks for direct quotes, and citations for that information which you have “borrowed” or paraphrased from other sources.
 
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