Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Neptune Company has developed a small inflatable toy it is anxious to introduce to its customers. The company's Marketing Department estimates demand for the new

image text in transcribedimage text in transcribed Neptune Company has developed a small inflatable toy it is anxious to introduce to its customers. The company's Marketing Department estimates demand for the new toy will range between 10,000 units and 40,000 units per month. The new toy will sell for $9.00 per unit. Enough capacity exists in the company's plant to produce 15,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $5.00, and incremental fixed expenses associated with the toy would total $30,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $4.00 per unit plus a fixed fee of $31,000 per month for any production volume up to 15,000 units. For a production volume between 15,001 and 35,000 units, the fixed fee would increase to a total of $62,000 per month. Required: 1. Calculate the break-even point in unit sales assuming Neptune does not hire the outside supplier. Note: Do not round your intermediate calculations. 2. How much profit will Neptune earn assuming: a. It produces and sells 15,000 units? b. It does not produce any units and instead outsources the production of 15,000 units to the outside supplier and then sells those units to its customers? 3. Calculate the break-even point in unit sales assuming Neptune plans to use all of its production capacity to produce the first 15,000 that it sells and also commits to hiring the outside supplier to produce up to 25,000 additional units. 4. Assume Neptune plans to use all of its production capacity to produce the first 15,000 units it sells and also commits to hiring the outside supplier to produce up to 25,000 additional units. a. What total unit sales would Neptune need to achieve to equal the profit earned in requirement 2a ? b. What total unit sales would Neptune need to achieve to attain a target profit of $32,500 per month? c. How much profit will Neptune earn if it sells 40,000 units per month? d. How much profit will Neptune earn if it sells 40,000 units per month and agrees to pay its marketing manager a bonus of 20 cents for each unit sold above the break-even point from requirement 3 ? 5. If Neptune outsources all production to the outside supplier, how much profit will the company earn if it sells 40,000 units

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Organizational Auditing And Assurance In The Digital Age

Authors: Rui Pedro Marques, Carlos Santos, Helena InĂ¡cio

1st Edition

1522573569, 978-1522573562

More Books

Students also viewed these Accounting questions

Question

What is the perception that members have of the team?

Answered: 1 week ago