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explain how you get the total cost function please Patsy Anderson is thinking about starting a company to produce wooden tables. Patsy loves making the
explain how you get the total cost function please
Patsy Anderson is thinking about starting a company to produce wooden tables. Patsy loves making the tables and sees it as an opportunity to own a company, making a living doing something she enjoys. Patsy paid $500 for the plans for the table, and has already purchased new equipment costing $2,600 to manufacture the tables. She estimates that it will cost $200 in materials to make each table. She will also need to rent an office and manufacturing space, which she estimates would cost $2,500 per month for rent plus another $200 per month for various utility bills. Patsy would perform all of the manufacturing and run the office, and she would like to pay herself a salary of $4,000 per month so that she would have enough money to live on. Because she does not want to take time away from manufacturing to sell the tables, she plans to hire two salespeople at a base salary of $2,000 each per month plus a commission of $20 per table. Patsy plans to sell each table for $500 ANALYZE MATION: Complete your analysis by answering the following questions. Use Excel for all calculations and Microsoft Word for the written portion. You will submit one file in Canvas (embed Excel into Word). You will be graded on accuracy, professionalism and organization. Your work must be easy to follow. If you work in a team, one team member will submit the analysis, make sure to include both team member's names. A. Perform analyses to estimate the number of tables Patsy would need to manufacture and sell each year for her business to be financially successful: 1. List all of the costs described and indicate whether each cost is (a) a relevant fixed cost, (b) a relevant variable cost, or (c) NOT relevant to Patsy's decision. 2. Calculate the contribution margin per unit and the contribution margin ratio. 3. Write down the total cost function for the tables and calculate the annual breakeven point in units and in revenues. 4. How many tables would Patsy need to sell annually to earn $2,000 per month more than her salary? B. Identify uncertainties about the CVP calculations: 1. Identify possible costs for Patsy's business that she has not identified. List as many additional types of cost as you can 2. Explain why Patsy cannot know for sure how many tables she will sell each year. In your explanation, identify as many risks as you can. C. Suppose Patsy asked for your advice. Use the information you learned from the preceding analyses to write a memo to Patsy with your recommendations Step by Step Solution
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