Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 3 (20 marks) Caribbean Gators Limited is a newly organized footwear manufacturing business that plans to manufacture and sell 40,000 units per year of

Question 3 (20 marks) Caribbean Gators Limited is a newly organized footwear manufacturing business that plans to manufacture and sell 40,000 units per year of a unique comfort footwear called "Gators" to compete with the famous Crocs brand. The following estimates have been made of the company's costs and expenses.

a. What should the company establish as the sales price per unit if it sets a target of earning an operating income of $200,000 by producing and selling 40,000 units during the first year of operations? (6 marks)

b. At the unit sales price computed in part a, how many units must the company produce and sell to break even? (Assume all units produced are sold) (4 marks)

c. What will be the margin of safety (in dollars) if the company produces and sells 40,000 units at the sales price computed in part a? (4 marks)

d. Assume that the marketing manager thinks that the price of this product must be no higher than $96 to ensure market penetration. Will setting the sales price at $96 enable Caribbean Gators to break even, given the plans to manufacture and sell 40,000 units? Explain your answer. (6 marks)

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

More Books

Students also viewed these Accounting questions