Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Childs play company makes a plastic rattle for toddlers. the rattle is generally marketed through exclusive retailers located in upscale shopping malls. the company used
Childs play company makes a plastic rattle for toddlers. the rattle is generally marketed through exclusive retailers located in upscale shopping malls. the company used 23 retailers. on late 2016, diana, the president of the company was considering alrernative marketing plans presented to her by bill, the marketing manager. based on sales from january through october 2016, diana expected that 2016 sales would amount to 300,000 unita at $8.00 per unit.
diana also had with her some cost data for 2016 supplied by the CFO Don. don expects that these costs are reliable estimates for a volume up to 400,000 units. beyond 400,000 units, the company would have to rent additional machines (with a capacity of 100,000 units each) l at an annual cost of $50,000 per machine (in 2016). the data are presented in Exhibit A.
total fixed manufacturing and selling and administrative costs are each expected to increase in 2017 by 10 percent because of inflation. variable costs per unit and the seling price would stay the same as in 2016.
manufacturing costs for rattles (based on production volume of 300,000 units)
direct material $0.80 per unit
direct labor $10 per hour (each worker can make 20 units in an hour)
packaging $0.75 per unit
power supplies indirect labor and other variable production costs $1.20 per unit
supervisory salaries equipment rental and miscellaneous production costs $1.80 per unit
*these costs vart in total woth production volume.
selling and administrative costs (based om sales volume of 300,000 units)
commissions to sales staff 10% of price to retailer
shipping $0.50 per unit
advertising and promotion $0.60 per unit
administrative staff salaries, depreciation on office equipment etc. $0.90 per unit
* these costs vary in total woth sales volume
FOR 2017
1. what is the profit at 1000 units above break even?
2. what is the profit at 2000 units below the break even
3. what is the profit at 100,000 units above break even
4. What is the margin of safety at 1000 units above break even
5. what is the sales volume required to give $100,000 profit before tax?
6. what is the sales volume required to give $180,000 after tax, assuming a tax rate of 40%?
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