Problem 1 Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed price on demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell each rack so that it can have a product profit margin of 28%? FIXED COSTS Year 1 Year 2 Year 3 Year 4 Year 5 TOTALS Research and Design P 200,000 9 30,000 P P 230,000 Manufacturing 50,000 50,000 50,000 50,000 50,000 250,000 Distribution 20,000 20,000 20,000 20,000 20,000 100,000 Customer Service 80,000 50,000 30,000 30,000 20,000 210,000 Other incremental operating costs 25,000 25,000 25,000 25,000 25,000 125,000 TOTALS 375,000 P 175,000 ? 125,000 P 125,000 ? 115,000 P 915,000 P P VARIABLE COSTS PER UNIT Manufacturing Distribution Customer Service TOTALS 500 P 100 50 650 P 450 P 100 50 600 4P 450 P 100 50 600 + 450 P 100 50 600 P 450 100 50 600 P UNITS TO BE SOLD AND PRODUCED 300 800 850 900 400 3,250 Problem 2 Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed price on- demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell each rack so that it can have a product profit margin of 28%? FIXED COSTS Year 1 Year 2 Year 3 Year 4 Year 5 TOTALS Research and Design P 200,000 P. 30,000 P - P P230,000 Manufacturing 50,000 50,000 50,000 50,000 50,000 250,000 Distribution 20,000 20,000 20,000 20,000 20,000 100,000 Customer Service 80,000 50,000 30,000 30,000 20,000 210,000 Other incremental operating costs 25,000 25,000 25,000 25,000 25,000 125,000 TOTALS P 375,000 P 175,000 P 125,000 P 125,000 115,000 P 915,000 P VARIABLE COSTS PER UNIT Manufacturing Distribution Customer Service TOTALS 500 P 100 50 650 P 450 100 50 600 P 450 100 50 600 P 450 P 100 50 600 P 450 100 50 600 P UNITS TO BE SOLD AND PRODUCED 300 800 850 900 400 3,250