Based on the calculations in Tab 3 using ABC, comment on the operating profits made for each product. Explain in your report why operating profits have changed under ABC analysis. Also indicate which of the systems – that is the traditional systems (using lumpsum or volume-based cost allocation in Tab 1 and Tab 2) or the ABC systems, (Tab 3) provide the best answers for decision making to improve cost management in order to improve operating profit.
The sustainability manger is concerned about the Anti-Deluxe Action group’s impact on the company and suggested that materials and process of making the Deluxe Boxes should be changed. As the process of making the Sustainable Deluxe Boxes, will be less intensive, a suggestion is made that the selling price for the Sustainable Deluxe Boxes could be $23 per unit. Discuss whether changing the price to $23 is a viable option for LGI? Provide evidence from the Excel workbook, Tab 4.
If the firm decides to sell the Sustainable Deluxe Boxes at the price the CEO demands to maintain the same profit percentage as for Standard Boxes do you think the new price calculated in Tab 4 is a viable option? Why is it important for LGI to know what their Breakeven quantity is? Also indicate which other (non-numerical information) should be considered when deciding to pursue the Sustainable Deluxe Box option.
