Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company's Marketing Department estimates that 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 that Neptune does not hire the outside supplier. 2. How much profit with 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 that Neptune plans to use all of its production capacity to produce the first 15,000 units that it sells and that it also commits to hiring the outside supplier to produce up to 25,000 additional units. 4. Assume that Neptune plans to use all of its production capacity to produce the first 15,000 units that it sells and that it 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 in order to equal the profit earned in requirement 2a? b. What total unit sales would Neptune need to achieve in order 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 10 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? units 1. Break-even point in unit sales - without hiring 2a. Profit if produces and sells 2b. Profit if outsources production and sells 3. Break-even point in unit sales - hiring units 4a. Total unit sales units units 4b. Total unit sales to achieve a target Profit of $32,500 4c. Net operating income 4d. Net operating income - bonus to marketing manager 5. Net operating income - fully outsourced Gold Star Rice, Ltd., of Thailand exports Thai rice throughout Asia. The company grows three varieties of rice-White, Fragrant, and Loonzain. Budgeted sales by product and in total for the coming month are shown below: Percentage of total sales Sales Variable expenses Contribution margin White 48 % $ 336,000 100,800 $ 235, 200 100 % 30 % Product Fragrant Loonzain 20 % 32 % $ 140,000 100 % $ 224,000 100 % 112,000 80 % 123,200 55 % $ 28,000 20 % $ 100,800 45 % 100 % 48 % Total 100 % $ 700,000 336,000 364,000 226,720 $ 137,280 70 % 52 % Fixed expenses Net operating income Dollar sales to break-even Fixed expenses CM ratio $226,720 0.52 = $436,000 As shown by these data, net operating income is budgeted at $137,280 for the month and the estimated break-even sales is $436,000. Assume that actual sales for the month total $700,000 as planned; however, actual sales by product are: White, $224,000; Fragrant, $280,000; and Loonzain, $196,000. Required: 1. Prepare a contribution format income statement for the month based on the actual sales data. 2. Compute the break-even point in dollar sales for the month based on your actual data. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a contribution format income statement for the month based on the actual sales data. Gold Star Rice, Ltd. Contribution Income Statement Product White Fragrant Loonzain Total Percentage of total sales % % % % % % % % % % $ 0 0 % $ 0 0 % $ 0 0 % 0 0 % 0