Question
Molly Jasper and her sister got into the novelties business almost by accident. Over time the figurines they made are now called Mollycaits'. The demand
Molly Jasper and her sister got into the novelties business almost by accident. Over time the figurines they made are now called Mollycaits'. The demand grew over time. The day came when a buyer for a major department store offered them a contract to produce 1,500 figurines of various designs for $10,000.Molly and Caitlain realized that it was time to get down to business.To make bookkeeping simpler,Molly had priced all the figurines at $8.00.Variable operating costs amounted to an average of $6.00 per unit.To produce the order,Molly and Caitlin would have to rent industrial facilities for a month,which would cost them $4,000. Answer the 5 following Questions. 1. Calculate Mollycaits' operating breakeven point. 2. Calculate Mollycaits' EBIT on the department store order. 3. If Molly renegotiates the contract at a price of $10.00 per figurine,what will the EBIT be? 4. If the store refuses to pay more then $8.00 per unit but is willing to negotiate quantity, what quantity of figurines will result in an EBIT of $4,000. 5. At this time,Mollycaits' come in 15 different varieties. Whereas the average variable cost per unit is $6.00,the actual cost varies from unit to unit. What recommendation would you have for Molly and Caitlin with regard to pricing and the numbers and types of units that they offer for sale?
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