SLP Time Warp 2 - Essay Example

Using the formula of the volume-cost-profit, the CVP determines the relationship between the three aspects and thus helps in decision-making, and strategy development. One key benefit of utilizing the CVP tool as an analytical tool is in its ability to facilitate making of decisions as pertains the three products under analysis, the X5, X6, and the X7. Further, its benefits include the capability of making decisions for a particular year, not at its start, but at the conclusion of the previous year (Bivainiene, 2010).

The utilization of the CVP is diverse and includes, but not limited to the calculation of the point of breakeven, as well as calculations of the possible prices of varied products that would yield a pre-specified profit margin. The main core of this project is to have a better performance as compared to that of Joe Schmoe, determined by the profit margin generated in the three products, X5, X6, and X7. The strategy to be adopted in this case will, therefore, be focused on increased revenue development that surpasses the amount that the company generated under the captainship of Joe Schmoe (Slotegraaf & Pauwels, 2008).

Under Joe Schmoe, the amount of revenue generated for the years extending 2012 -2015 was $ 954, 830, 241. This strategic analysis wills thus focuses on the generation of revenues to the tune of $ 1, 000, 000, 000. The manner in which this figure is hoped to be attained is depicted in the table displayed below. The accuracy of this table is guaranteed since any figures have been arrived at after careful analysis of the Time Warp 1 and profits attained by Joe Schmoe. Profit allocation for $1, 000, 000, 000.

Product X5: Having been in the market for a period of about 3 years, the developmental stage for the product can be defined as being between maturity and shakeout. The sensitivity of the products price has the consequent affect that to increase in the sale of the various units; a price reduction may come in handy. This, in essence, is the strategy for growth that we plan to implement as concerns product X5. After inputting such variables as the R & D, the price, ands the aspired profit into a CVP calculator, we can confidently calculate the relation between the targeted profit and the sales volume projected.

The same procedure was repeated in the year 2013. However, the product line was discontinued since it is evident that the profitability of the product X5 is limited, attributable to its attaining its maturity phase. This table is reflective of the volume of sales required to achieve the $ 1 million in terms of profits, assuming that the product X5 is sold at $ 245, with a 30% R & D, yielding a total value of about 1, 676, 190 units. This figure is arrived at by a calculation of the cumulative revenue as a factor of the unit price.

Alternatively, this calculation can be made via the sum of the fixed costs as a ratio of profits, calculated by their contribution margin in each unit. Product X6 The product X6, one of the products in the tablet development, boasts of a 2 year existence in the market. Unlike in the case of the X5, the product X6 reveals that customers look into such issue as performance and quality in making decisions on whether to purchase a specific product or not. The product quality is directly related to the specifications