Question
Peacock Ltd is a medium-sized electronic chip manufacturing company in Cambridge. It produces a new generation of chips for mobile phones which enable them to
Peacock Ltd is a medium-sized electronic chip manufacturing company in Cambridge. It produces a new generation of chips for mobile phones which enable them to scan the mobile phone users environment for targeted advertising. The cost of producing each chip is estimated at 26.65 and the company will be selling them for 29. The company expects to make and sell 1,720,000 of these chips in the coming year. The total fixed costs of operating the company for the year are estimated at 3,540,000. The total production capacity of the company is 2,000,000 of these electronic chips per year. The total capital invested in the company is 5,160,000.
a) Calculate the companys expected profit and expected return on investment (ROI) for the year.
b) Calculate the companys break-even point in the number of chips and in sales value.
c) Calculate the margin of safety as a percentage of the expected level of sales
d) Calculate the number of chips that the company needs to sell per year in order to give the company a return on investment (ROI) of 15%.
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