Scenario Analysis As part of the process of preparing the master budget for the coming year,you’ve been asked to perform What-If analyses, in the form of scenarios, on the original planningassumptions regarding product A produced by your company. The following are the baseline planning data for the coming year for this product:Sales volume (annual, in units) 2,500Selling price per unit $ 1,500Variable cost per unit $ 1,000Fixed costs (per year) $200,000Required1. Based on the baseline planning data, what is the budgeted operating income for product A for the coming year?2. Determine the estimated operating income under each of the following scenarios (for each scenario youshould report both the new budgeted operating income and the percentage change in operating incomefrom the baseline budgeted result):a. Selling price per unit is 10% higher than planned, while fixed costs per year are also 10% higher thanplanned.
Scenario Analysis As part of the process of preparing the
you’ve been asked to perform What-If analyses, in the form of scenarios, on the original planning
assumptions regarding product A produced by your company. The following are the baseline planning data for the coming year for this product:
Sales volume (annual, in units) 2,500
Selling price per unit $ 1,500
Variable cost per unit $ 1,000
Fixed costs (per year) $200,000
Required
1. Based on the baseline planning data, what is the budgeted operating income for product A for the coming year?
2. Determine the estimated operating income under each of the following scenarios (for each scenario you
should report both the new budgeted operating income and the percentage change in operating income
from the baseline budgeted result):
a. Selling price per unit is 10% higher than planned, while fixed costs per year are also 10% higher than
planned.
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