Business Memorandum
Date: 01/20, 2014
To: President of Huron Company
From: xxxxxxxxxxxxx
Re: Business Memorandum
Scope and objective of the work performed
In order to do a good job on budget, describe my decision model and choose the
appropriate action to earn more profits for the company, I collect relevant data related to
direct material, direct labor and manufacturing overhead of the company. Then, I prepared
the schedule of Cost of Goods Sold, Cost of Goods Manufactured and the Income
Statement for the year 20×2. Based on those schedule, I could analysis two Schedules and
the Income Statement based on two possible cost projections.
Significance of the sensitivity analysis
The sensitivity analysis is a method to measure changes in the factors of the expected
results of the investment project. Through sensitivity analysis, we could know clearly
about the crux of the issue, to avoid errors, prevent mistakes in decision making, thus
enhancing the execution key link or on the key issues. Based on the two actions I
presented, I got the same total cost of goods manufactured $1,772,500. In Action 1, the
original tax expense is $ 25000, and the income before taxes is $66,000, then, my Excel
spreadsheet displayed the net income is $ 41,000. Compare with action 1 and action 2, the
depreciation on factory equipment has decreased by 20,000 in action 1. In action 2, the
indirect labor has been increased by 35,000. Prepare these spreadsheets and did the
sensitivity analysis, I know how to do that can help me to have a better understand of the
