1. Sharks Inc. produces fishing equipment. A market leading luxury fishing rod sells for $ 135 / unit and has a cost of production of $ 100 / unit. currently. A close competitor is introducing a similar product at a price of $ 130 / u. Sharks understands that it must offer the same price as this competitor if it is to maintain its current sales level of 200,000 units per year.

a. What should the target cost be if the objective is to earn 22% of the sales price and you want to sell the product at $ 130 / unit?

2.Gorro Sombrero is considering opening a stand in a mall to sell hats. He wants to know how many caps he has to sell to break even. The caps would sell for $ 18, variable costs of $ 10 per cap, and the annual fixed costs are $ 63,000.

a. How many caps does he have to sell annually to break even.

b. What would be the total operating costs to break even?

c. If Gorro estimates that the least he sells that business is 1,000 caps a month, should he start the business?

d. What would be the net profit before income tax that Gorro would have if he sells 1,000 caps per month?

3. Cool Gafitas Inc. sells sunglasses. Last year the glasses sold for $ 35 each, with variable costs per goggle of $ 22 and fixed operating costs of $ 25,000. How many glasses does Cool Glasses have to sell this year to break even considering the aforementioned costs, given the following scenarios? a. All numbers remain the same as last year.

b. Fixed operating costs increase to $ 30,000, other items remain the same.

c. The sale price is increased to $ 40, all costs remain the same as last year

d. The variable cost per glasses increases to $ 24, the other items remain the same as last year.

4. The sales projection of a certain company for the next year of operations will be 15,000 units. Currently, the company has 1,000 units in inventory. Since he understands that it is a lot of inventory, the company plans to reduce the ending inventory for the next year of operations to 60% of the current amount. On the other hand, the company wants to project its conversion costs for the coming year and plan how to reduce them. Currently, these costs represent an average of $ 55 / unit to be produced, of which 40% represent direct labor.

a. Calculate the production budget in units

b. Calculate direct labor cost budget