After years of planning, the Hanson brothers are pumped! They just opened their new hockey stick business called Cellys Inc. Their plan is to manufacture hockey sticks and create partnerships with sports retailers across Canada and the United States to sell their hockey sticks.

The new stick will be called the Toe Drag, and the Hansons are considering retail prices of $159.00, 179.00, and 189.00. They need your help to determine what price be the best to maintain their competitiveness in the market while developing a profitable framework.

Help the Hansons determine critical breakeven information for the Toe Drag and recommend the most appropriate price for the first year of operations in which they forecast a sales target of 18,000 units for the first year

The Hansons estimate that 42% would be their portion of the retail sales price and that the retailer would receive the rest as their share of the revenue.

Calculate the following for all three prices:

1. Unit contribution,

2. Breakeven [units],

3. Breakeven Sales

4. Also, calculate the profit for the sales target of 5,000 units.

Anticipated Costs: Calculate per year.

• Mortgage payments per month. $2150.00
• Yearly Depreciation on the building $7,000.00
• Yearly Depreciation on the manufacturing equipment 3000.00
• Management Salaries (for each brother, Jack, Steve and Jeff (3 of them) @ $50,000 each per year
• Hourly manufacturing labour. This is estimated at .5 hours or 30 minutes @ $30.00/hour for each unit.
• Property taxes per quarter $1850.00
• Yearly Insurance $3500.00
• Hockey stick design engineer. Yearly consulting fee: $4,500.00
• General administrative expense including bookkeeping services. This is paid monthly at a flat rate of $300.00
• Stick manufacturing materials such as resins, composite, and labels to assemble each stick (unit) $7.00
• Manufacturing equipment (buying and setting up the shop and equipment make the Toe Drag hockey sticks $25,500.00
• Freight to ship the finished product to the retailers per unit $5.00

Here are your tasks:

Classify each cost as fixed or variable.

When tabulated:

Calculate the yearly total fixed cost.

Enter your answer for the FIXED COST

HERE: Answer

Calculate the variable costs for each unit

Enter your answer for the VARIABLE COST for each unit:

HERE: Answer

Calculate the unit contribution for each price. ($159.00, $179.00, and $189.00).

Enter your answer for unit contribution for $159.00

HERE: Answer

Enter your answer for unit contribution for $179.00

HERE: Answer

Enter your answer for unit contribution for $189.00

HERE: Answer

Calculate the break-even units for each price ($159.00, $179.00, and $189.00).

Enter your answer to the break-even units for $159.00

HERE: Answer

Enter your answer to the break-even units for $179.00

HERE: Answer

Enter your answer to the break-even units for $189.00

HERE: Answer

Calculate the break-even sales for each price ($159.00, $179.00, and $189.00).

Enter your answer to the break-even sales for $159.00

HERE: Answer

Enter your answer to the break-even sales for $179.00

HERE: Answer

Enter your answer to the break-even sales for $189.00

HERE: Answer

Calculate the profit for the sales target of 5000 units for each price (($159.00, $179.00, and $189.00).

Enter your answer for the profit at a price of $159.00

HERE: Answer

Enter your answer for the profit at a price of $179.00

HERE: Answer

Enter your answer for the profit at a price of $189.00

HERE: Answer