Question
According to revenue and cost information below High-End SetEconomical Set Sales price$3,500per unit$1,000per unit Labor$875per unit$250per unit Materials$1400per unit$300per unit Direct fixed costs$25,000per month$16,500per month
According to revenue and cost information below
High-End SetEconomical Set
Sales price$3,500per unit$1,000per unit
Labor$875per unit$250per unit
Materials$1400per unit$300per unit
Direct fixed costs$25,000per month$16,500per month
Allocated fixed costs$85,000per month$85,000per month
Could you please determine :
- Contribution Margins for each product line
- Break-even quantities for each product line
- Break-even quantities to earn $500,000 per year margin on the high-end line (at the current sales price)
- Break-even quantities to earn $300,000 per year margin on the economical line (at the current sales pric
Also,considering the purchase of machinery and equipment on a 5-year timeline:
Initial cash outlay is $150,000, no residual value.
Sales price is expected to be $2,250 per unit, with $595 per unit in labor expense and $795 per unit in materials.
Direct fixed costs are estimated to run $20,750 per month.
Cost of capital is 8%, and the required rate of return is 10%.
They will incur all operational costs in Year 1, though sales are expected to be 55% of break-even.
Break-even (considering only direct fixed costs) is expected to occur in Year 2.
Variable costs will increase 2% each year, starting in Year 3.
Sales are estimated to grow by 10%, 15%, and 20% for years 3 - 5.
Could you please calculate:
1.The product's contribution margin
2.Break-even quantity
3.NPV
4I.RR
thank you
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started