Case Questions: Would you decide to “hatch” Chicken
Sensations? Put yourself in Vicki’s shoes. Prepare an analysis
that will guide PFVC’s decision on whether to launch
1. Economic feasibility analysis: Perform an economic cost-
benefit analysis of whether PFVC should launch Chicken
Sensations. Clearly state your decision and conclusion
from your analysis. (You can use an Excel spreadsheet to
complete these tasks in an organized, neat appendix to
your case analysis. A reader of your case should be able
to follow your work and computations. The results of
your appendix analyses can be referenced in the body of
your case to support your decision.) To aid your analysis,
perform the following tasks:
a. Quantity, revenue, and cost conversions: Take Vicki’s
data from Table 1 and compute the quantity, revenue,
and cost conversions to complete Table 1. For
example, calculate annual sales revenues (in cases),
sales revenue and variable cost amounts per case, and
annual fixed cost amounts.
b. Forecasted contribution margin income statement:
Prepare a forecasted Chicken Sensations contribution
margin format income statement for year 1 based on
the projected data gathered by Vicki.
c. Breakeven analysis: Prepare a breakeven point
analysis (in cases and sales dollars) for the year 1
forecasts of Chicken Sensations.
d. Margin of safety: Prepare a margin of safety analysis
(in cases and sales dollars) for the year 1 forecasts of
e. Sensitivity analyses: Prepare sensitivity analyses to
examine how robust year 1 results are to changes in
projections for (1) the sales volume of cases, (2) the
sales price per bag, and (3) the cost per pound of
chicken. Assume that these amounts can change for
three different projection levels as reported in Table 2:
(1) a pessimistic level, (2) the original level, and (3) an
optimistic level. Table 2 shows that the sales volume
(in cases) will be 75% of the original year 1 sales
forecast, the sales price per bag will only be 90% of
the original forecast (or $2.70/bag = $3.00/bag × 90%),
and the cost per pound of chicken will rise to 112.50%
of the original forecast (or $2.25 /lb. = $2.00/lb. ×
112.50%) for the pessimistic level. The original level
reports the results using the original projections in
the case. Under the optimistic level, the sales volume
forecast (in cases) will be 125% of the original year 1
sales forecast, the sales price per bag will increase to
110% of the original forecast (or $3.30/bag = $3.00/
bag × 110%), and the cost per pound of chicken will
decrease to 87.50% (or $1.75 /lb. = $2.00/lb. × 87.50%).
Report your sensitivity analysis results in Table 3.
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