ACCT 210 Cost-Volume-Profit & Incremental Analysis Case Study 7, Assuming the selling price and cost changes In the Marketing Plan are adopted, delermine the number of ratties the company would need to sell in 2019 in order to earn $100,000 in profit. For ful credit, please show the elements of your computations. Round to the nearest next whole unil. Name Class Soction Time Name Please staple your pages together This case study may be completed individually or with a partner from your ACCT 210 class section. The 12" 2018 The to the front desk of the School of Accountancy (McCielland Hall Room 301) no later than rt is worth 8 points. There w be a 20% point dectuction for every business day or partial business assignme day that the assigment is late. Child's Play Company plastic rattle for toddiers. The rattle is generally marketed through e le shopping malls. In late 2018, Diana Suarez, the president of the company, was Child's Play Company makes a retaiers located in upscal an alternative marketing plan for 2019 that was presented to her by Bill Duffy, the marketing Based on sales fram January through September 2018, Diana expected that 2019 sales would manager. amount to 300.000 units. Bil's alternative marketing plan is presented below: Part 2 2019 Marketing Plan: 'At the present time, we sell the product t o retailers for s8.00 per rattle. Retailers Child's Play has been approached by the government, which is seeking to buy 150,000 ratties for its day care centers in 2019. The proposed govenment contract states that the govermment would pay Child's Play a price of $4.25 per rattle. If Child's Play decides to accept this special order, they would avoid packaging coets for this contract as well as all variable selling and adminietrative costs. The company's capacity is limited to only 400,000 units. If they accept the government contract, they will need to increase their capacity by renting an additional machine. Refer to page 1 for the company's estimated cost data and additional machine rental cost generally charge the consumers between $9 and $9.50. If wee cut our s elling price to retailers to $7.50, 1 will do much better. Their increased markup will give them the incentive to display our to customers. We should support this strategy by product more prominently and to promote it more vigorously supplying more promotional materials to retailers, which I expect would be an increase of $4,600 in Advertising and Promotion costs. Based on the price cut and the increase in advertising and promotion, I expect that we be able to boost our sales volume by 20 percent to 360,000 units in 2019 Diana received cost data from the reliable estimates for 2019 for a production volume up to 400,000 units would have to rent additional manufacturing overhead costs by $50,000 per machine company's CFO, Don Capp. Don expects that the cost data below are also Assume that Child's Play does not adopt the proposed Marketing Plan and that the company's production and sales level without the government contract is expected to be 300,000 rattles for 2019 . Beyond 400,000 units, the company machines (with a capacity of 100,000 units each), which would increase fixed Prepare an analysis below to determine the incremental net income or net loss that Child's Play would recognize if they accept this special order 1. t Da Manufacturing Costs for rattles (based on production volume of 300,000 units) Direct Materials vc Direct Labor $0.80 per unit $10 per hour (each worker can make 20 units in 1 hour) Packaging $0.75 per unit Variable Manufacturing Overhead k $1.20 per unit Fixed Manufacturing Overhead $540,000- Selling and Administrative Costs for rattles (based on sales volume of 300,000 units) Sales Commissions Shipping Costs Advertising and Promotion (fixed) $180,000 Fixed Selling and Admin Expenses $270,000 $0.80 per unit $0.50 per unit 2. Should Child's Play accept or reject the government contract