Reference no: EM13347588

Analytical Exercise

Scenario: ABC Company sells widgets in three varieties (red, yellow and blue) but has lost money for the past three years. Competitive intelligence displays the Company's products are priced 10% above the competition but that competitor prices will increase by at least 8% annually.Provide  the Company is mandated by Widget Cost Reform (WCR) to spend a minimum of x% of revenue on cost of goods sold (COGS), what actions could you recommend to the CFO? What are the key drivers to attaining profitability by 2015?

Use the peach colored cells for your inputs and formulas in order to evaluate profitability and still satisfy the minimum WCR Expense Ratios mandated by the WCR regulations.

Facts

• WCR Expense Ratios (effective January 2012): Blue Widgets 85%, Red Widgets 80% and Yellow Widgets 90%

• Going forward, Administrative Expense Ratios improve by leveraging growth ... 1.0% for every 10% increase in widget sales for a provided widget type.