Question 6

[The following information applies to the questions displayed below.) Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $516 each. Costs 1. Plastic for casing-$19,000 2. Wages of assembly workers--$90,000 3. Property taxes on factory-$7,000 4. Accounting staff salaries-$33,000 5. Drum stands (1.000 stands purchased)-$35,000 6. Rent cost of equipment for sales staff-$36.000 7. Upper management salaries-$170,000 8. Annual flat fee for factory maintenance service--$16,000 9. Sales commissions-$25 per unit 10. Machinery depreciation, straight-line-$42,000 6) Increase to costs: The production manager is anticipating inflation and other increase that will result in total variable expenses increasing by 20%. a) What will the new profit formula be? b) What will the CM ratio and Break-Even point in units be with the labor increase? Note - Requirement asks for CM ratio, NOT contribution margin in dollars or contribution per unit. c) If they produce and sell the same number of units for Year 4, what will their new Net Operating Income, NOI, be? d) How many units will TrueBeat need to sell to maintain the same operating income as originally planned for Year 4? e) Assume TrueBeat Company need to make a minimum profit of $1,000,000 to keep its creditors and investors happy. What minimum sales price will they need to charge if they produce and sell 6,000 units? Hint: Remember that CM -Sales price - Variable expenses. f) Conclusion: Use your calculation above, should TrueBeat be concerned about future costs increases? Make sure your answer uses complete sentences and includes 30 to 50 words to support your