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If the company is unable to sell the deluxe boxes for more than $27.86, what are possible alternatives? How can I improve EBITDA. would manufacturing

If the company is unable to sell the deluxe boxes for more than $27.86, what are possible alternatives? How can I improve EBITDA.

would manufacturing the Loot Boxes in-house lead to a price reduction?

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Tab 1. Largo Global Production and Cost Information 2020 Product Type Standard Loot Box Deluxe Loot Box Volume (Number of Products) 80 20 100 Selling Price Per Unit 18.20 $ 27.85 Total Sales 1,456.00 557.00 $ 2,013.00 Cost of Sales 1 180 220 1400 Selling and Admin Charges 52.5 ;2.5 125 Depreciation 87 87 174 Purchases 1124.8 281.2 1406 Gross Profit 336 277 613 1 Determine Purchases 2020 Cost of Sale 1400 Plus: Closing Inventory 404 Less: Opening Inventory 398 Purchases 1406 2 Use traditional Allocation Method to Allocate Cost Allocated Cost Total Costs Standard Loot Box Deluxe Loot Box Purchases $ 1,406.00 $ 1,124.80 $ 281.20 Selling and General Admin 125 $ 62.50 52.5 Depreciation 174 $ 87.00 87 Total Cost of Products 1,705.00 5 ,274.30 $ 430.70 Number of Products 100 80 20 Cost per Prod S 17.05 $ 15.93 $ 21.54 3 Determine the Profit Margins per product Standard Loot Box Deluxe Loot Box Total Sales 1,456.00 $ 557.00 $ 2,013.00 Less: Cost of Products 1,274.30 5 430.70 $ 1,705.00 Profit 181.70 5 126.30 5 308.00 % Profit (Profit/ Sales) 12.48% 22.68% 15.30% Tab 2 1 Allocated the costs based on this new information Allocated Cost Standard Loot Box Deluxe Loot Box Total Purchases 913.90 $ 70.30 $ 984.20 Freight charges 210.90 $ 10.90 $ 421.80 Selling Costs 37.50 5 37.50 $ 75.00 General Admin Costs 25.00 5 25.00 5 50.00 Depreciation 87.00 $ 87.00 $ 174.00 Total Costs of Products 1,274.30 $ 430.70 5 1,705.00 Number of Products 80 20 100 Cost per Product 15.93 $ 21.54 $ 17.05 2 Determine the Profit Margins per product based on the allocations above Standard Loot Box Deluxe Loot Box Sales 1,456.00 $ 557.00 Less: Cost of Products 1,274.30 $ 430.70 Profit 181.70 5 126.30 % Profit (Profit/ Sales ) 12% 23%Tab 3 Manufacturing Deluxe Loot Box Sum of the Cost Cost of Standard Loot Cost of Deluxe Loot overhead $ Amount Cost driver Standard Loot Box Drivers Box Check Box Purchases 984.20 Number of units purchased BO 20 100 11.42 |$ 3.52 Freight charges 121.80 Kilometers travelled 1,000 4,000 5,000 0.21 0.05 Selling Costs 75.00 Number of sales orders 10 9.38 $ 6.25 Admin instrative Costs 50.00 Number of employees 2 3 5 12.50 B.33 Depreciation 174.00 Square Feet 2000 1000 3000 0.04 0.09 Total Allocated 1,705.00 costs 33.55 5 18.24 Allocated cost per unit 17.05 Number of Units sold 80 20 100 0.42 0.91 2. Use ABC costing determined in 1 above to calculate the profit and profit margins of the two products Standard Loot Box Deluxe Loot Box Total Sales 1,456.00 5 557.00 $ 2,013.00 Less: Costs 1,274.30 $ 430.70 5 1,705.00 Net (profit /loss) 181.70 $ 126.30 $ 308.00 Profit margin 12% 23% 15% Tab 4 1 Assume the Deluxe Product can be sold at the same profit margin as the Standard Product (See Tab 3). Calculate the New Selling Price for the Deluxe Product ? Allocated CPU 21.54 Profit margin as " 30% New Selling Price 30.62 2 Provide a Proof For your Claculation: Total $ Total 612.40 Less Costs 430.70 Profit 181.70 Calculate the New Breakeven Point in Volume based on the new Selling Price you detertmined above. You can 3 assume that only the Purcahses costs are Variable, all other costs are fixed $ Sales Price / unit 30.62 Variable Costs /unit 14.06 Marginal Cost / unit 16.56 Fixed Costs 149.5 Break Even

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