Factory: 10,250,000 Production: 8,500,000 Insurance: 6,000,000 Advertising: 5,000,000 Equipment: 5,530,000

Battery: 10 Camera: 45 Internal: 90 Receiver: 35 Screen: 95 Speaker: 25

Iphone: 750

Tableau DA 18-3: Mini-Case, Margin of safety and evaluating strategies LO C2 Our team is hired by Apple to help assess whether or not to continue to manufacture and sell an older model of the iPhone Apple explains that this model continues to sell well in foreign markets but it worries that fixed costs are so large that it is difficult to earn a profit. The Tableau Dashboard is provided to aid our analysis of this model. Total Fixed Costs Factory rent expense Insurance expense Equipment depreciation expense Production manager salaries Advertising expense Variable Costs Per Unit Battery Camera Internal Components Receiver Screen Speaker Sales Price Per Unit iPhone Answer the requirements for each of the following separate situations. 1. If Apple expects sales of 100,000 units, compute its margin of safety (a) in dollars and (b) as a percent of expected sales. 2(a). Apple anticipates it will sell 100,000 units in the coming year. It is considering investing in a new machine that will increase its fixed costs by $7,500,000 per year and decrease its variable costs by $40 per unit Compute net income if Apple does not purchase the machine. 2(b). Apple anticipates it will sell 100,000 units in the coming year. It is considering investing in a new machine that will increase its fixed costs by $7,500,000 per year and decrease its variable costs by $40 per unit Compute net income if Apple does purchase the machine. 3(a). Apple anticipates it will sell 100,000 units in the coming year. A marketing executive believes that increasing advertising costs by $4,000,000 will increase Apple's sales volume to 110,000 units. Compute net income if Apple does not increase advertising expenses. 3(b). Apple anticipates it will sell 100,000 units in the coming year. A marketing executive believes that increasing advertising costs by $4,000,000 will increase Apple's sales volume to 110,000 units. Compute net income if Apple does increase advertising expenses. Required 1 Required 2A Required 2B Required 3A Required 3B If Apple expects sales of 100,000 units, compute its margin of safety (a) in dollars and (b) as a percent of expected sales. Margin of Safety (a) Dollars (b) Percent % Required 1 Required 2A Required 2B Required 3A Required 3B Apple anticipates it will sell 100,000 units in the coming year. It is considering investing in a new machine that will increase its fixed costs by $7,500,000 per year and decrease its variable costs by $40 per unit. Compute net income if Apple does not purchase the machine. Does not purchase the new machine Sales Variable costs Contribution margin 0 Fixed costs Net income $ Required 1 Required 2A Required 2B Required 3A Required 3B Apple anticipates it will sell 100,000 units in the coming year. It is considering investing in a new machine that will increase its fixed costs by $7,500,000 per year and decrease its variable costs by $40 per unit. Compute net income if Apple does purchase the machine. Does purchase the new machine Sales Variable costs Contribution margin 0 Fixed costs Net income $ 0 Required 1 Required 2A Required 2B Required 3A Required 3B Apple anticipates it will sell 100,000 units in the coming year. A marketing executive believes that increasing advertising costs by $4,000,000 will increase Apple's sales volume to 110,000 units. Compute net income if Apple does not increase advertising expenses. Does not increase advertising expenses Sales 0 Variable costs Contribution margin Fixed costs Net income 0 Required 1 Required 2A Required 2B Required 3A Required 3B Apple anticipates it will sell 100,000 units in the coming year. A marketing executive believes that increasing advertising costs by $4,000,000 will increase Apple's sales volume to 110,000 units. Compute net income if Apple does increase advertising expenses. Does increase advertising expenses Sales Variable costs Contribution margin Fixed costs Net income $ 0