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1.Borden Manufacturing of Regina, Saskatchewan, produces emergency power generators and sells them through a network of retailers. The total generator market is 50,000 units per
1.Borden Manufacturing of Regina, Saskatchewan, produces emergency power generators and sells them through a network of retailers. The total generator market is 50,000 units per year and Borden holds a 4% share. The retail selling price for a generator is $2,000 and the retailer is taking a 35% margin Debra Stern, Borden's controller, calculates variable production costs to be $825 per unit and fixed manufacturing costs to be $280,000 per year. In addition, Borden covers packaging and shipping costs of $45 per unit. Yearly management and sales salaries are S95,000 and S65,000 respectively. The annual advertising budget is $120,000 Prepare an income statement for Borden manufacturing and answer the following specific questions a)What is the manufacturer's selling price per unit? b)What are Borden's variable costs per unit? c) What are Borden's total fixed costs? d) What is the variable contribution per unit? e) What is the breakeven unit volume for Borden? f)What market share does the breakeven volume represent? g)What is Borden's current net profit? h)When Borden was established, the company's owners provided an initial investment of $1,200,000. These investors require a return of 16% on their investment each year. Does the generator line produce enough profit to satisfy the investors? i)What are the profits, if any, after the return on investment is paid out? j) Ted Rastelli, Vice-President of Marketing, estimates that Borden can sell 6% more generators than its current volume by increasing the advertising budget from S120,000 to $140,000. Alternatively, if the advertising budget is reduced by $20,000, sales are expected to drop by 95 units. Should Borden raise or lower the advertising budget? Why? k)Instead of changing the advertising, Borden is considering an offer of a free safety light with each generator sold. These lights would cost Borden $60 each. If this free offer can generate sales of 180 units, what would be the change in total profits
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