question 9

Under New production facility New Break-even New Year 4 6.000 Units Sales Revenue NOI -0- b) Assume TrueBeat sells the same units as planned for Year 4 in the new plant, calculate the new margin of safety in (i) units) (ii) dollars and (iii) percent. i) MoS units ii) MoS dollars iii) MoS percent Has margin of safety improved or declined? Explain/comment in 10 to 30 words. c) Calculate the degree of operating leverage. Has operating leverage improved or declined from the "base" calculation in 9)? Discuss in 10 to 30 words. d) Conclusion: If you were a member of top management, would you have been in favor of constructing the new plant? Explain in 30 to 50 words risk factor a huge 7) Changing sales price: Marketing research indicates that TrueBeat Company can sell more units of its product if they lower their sales price by 10% per unit Remember to treat this scenario as independent from the items considered in 6. a) Calculate the new sales price and (ii) contribution margin per unit. i) new sales price 64.9 516-101.64.4 ii) CM per unit -4.4 iii) What will the new Profit formula be? Profit Formula (New sales price per unit- variable 20st) fred cost profit b) How many units will they need to sell to make the same operating income (NOI) as originally projected for year 4 (base assumption)? 43000 304150 /15.43 175 itt a c) How many units will they need to sell to break-even at the new sales price? 304000/245.4 = 1024 units . d) If TrucBeat Company can sell 20% more units (2 times original units) with the decreased sales price, how much operating income will they make? 590,500 - 309.000 . 286.800 e) Conclusion: Using the information calculated above, should TrueBeat lower their sales price? Why or why not? Will their relevant range be an issue for this decision? Your answer should include full sentences and 30 to 50 words. True Beat should mostly not consider to spline the price if they estimate that their sales world not increase, becquce with a reduction of price, they have to sell more units than usual to break even which is a 8) Increase Fixed Costs: TrueBeat's management is also considering purchasing additional advertising for $40,000. Marketing studies suggest that sales will increase by 200 units a year. Should the thera bien to produce company purchase the additional advertising? Your answer should use complete sentences and me but can be contain 30 to 50 words. Support your answer with calculations of at least 2 of the following items if they cout seul planned maintain the same Net Income as originally assumed for year 4. You may also use other calculations unite that you feel are relevant. Remember to treat this scenario as independent from the items considered to bright idea in 6) and 7) True beat's mana pment should ineux additional advertising loveduce ding price since selling expence as it will give more operating profit. Their profit is increased by 829400. Not increased find cost Increased fired cost 304000/516-1673.971 unit 3440001516-164 941 units 9) New Plant? Because TrueBeat's capacity is limited to 8,000 units in their current production facility, management would like to explore the impact of building a new production facility. The company is considering a new production facility and equipment that will decrease their variable expenses by 30% but increase fixed expenses by 50%. TrueBeat still plans to produce and sell the same number of units in Year 4 (base). The new plant will give them a relevant range of 5,000 to 12,000 units. a) If the new production facility is built, what would be the company's new (1) contribution margin per unit, (ii) fixed expenses and (iii) the new profit formula? Complete the table below. i) New CM per unit ii) New Fixed expenses iii) New profit formula only b) Using absorption costing, prepare an absorption costing income statements for TrueBeat for Years 2, 3 and 4. Sales revenue Cost of Goods Sold Gross Margin S&A expenses Nct Onerating Income TrueBeat Income Statement Absorption Costing) For Y cars ending December 31 Year 2 Year 3 1.54 RDD 2.520. DINO 7151600 1192.600 932.60 1.387.5 DD 312.500 337,500 520.000 1,050.000 Year 4 3.196.DDD 1.322.000 1.764. 250.000 c) Do you think TrueBeat's decision to maintain drum sets inventory from year 2 until they are sold in year 3 was a good decision? Use complete sentences and 30 to 50 words in your answer. The net operating income in year is more than double, than your the decision tatem sem to be good de vision the wendy manufactured drum sett promils celotion to 4) TrueBeat expects production and sales levels to remain constant from year 4 onward at 6,000 drum Company finally sets. Write a Profit Formula for TrueBeat's operations using variable costing. NOI = Q x CM unit dem Shorela FC, where Q represents the number of units produced and sold, CM unit is the contribution margin pweding gore per unit and FC is the total fixed expenses. Tacame poche a) Profit formula Contribution maryn: Total Soles - Total variable expenses, Profita Contribution margin - Total b) Complete chart assuming the same number of units will be produced and sold. fred expenses Units Sales Variable Fixed produced/sold Revenue Expenses Expenses Profit/NOI 4.0002.06 676. DOD 204. DO 5.000 250.000 304,000 1.BLO 6,000 3,096ADD 4. DOD 304.100 1.778. 7.000 EX512 ILIRBODA 304. DOD 2.225.00 c) Prepare a Cost-Volume-Profit graph for TrueBeat Company (you can use the graph at the end of the assignment or create your own) i) Label both the x and y axis using appropriate increments. Dollar values should be used for they axis and number of units for the x axis. ii) Plot the Fixed Expense line. Label it. iii) Plot the Sales Revenue line and label it. iv) Plot the Total Expense line and label it. v) Indicate the Break-even Point on the graph and label it. vi) Shade and label the portion of the graph that indicates the company's positive profit. All other costs are considered consistent and within relevant range for production of 4,000 to 8,000 units. Use the information provided above to adjust amounts from the table in 1). Include the adjusted amounts in the table below. TrueBeat adjusted summarized data for production 4,000 to 8,000 units Adjust summarized data Average Cost Total per Unit Dollars Direct materials 19 Direct labor 103 Variable manufacturing overhead sl GOL Fixed manufacturing overhead $ 190.000 7000 + 3000+ 63,07 +110,000 Fixed selling & administrative expense 275.000 170,000 33,00 72,00 Variable selling & administrative expense $13.5 Sales price per unit $ $ Note: The table above may be submitted early for verification. Upload it to the "submission" drop box on D2L, email or text a photo or PDF to Teri and she will look at it before you continue with the project. 3) TrueBeat's management will need to produce 4,000 units in Years 2 and 3 (to meet relevant range) and 6,000 units in Year 4. However, they anticipate selling only 3,000 units in Year 2 but 5,000 units in Years 3 and 6,000 units in Year 4. They will have to carry inventory produced in Year 2 until it is sold in Year 3. Note: Net Operating Income, or NOI, for this course is essentially Income before interest or tax expense and represents the operationally controlled components of Net Income. a) Using variable costing and contribution margin income statement format, prepare predictive income statements for Years 2, 3 and 4 below. Sales revenue Variable production costs Variable S&A expenses Contribution Margin Fixed Overhead Fixed S&A expenses Net Operating Income TrueBeat Income Statement Variable Costing) For Years ending December 31 Year 2 Year 3 1548.000 2,580.000 56700D 945. DOO 27.500 62.500 94.500 1.5 72.500 198.000 198. DDO 275.D 275.000 470.500 1.099.500 Year 4 3.091.000 1. 134.000 75.000 1887.000 198.ODD 275.000 1) Summarize the information for TrueBeat from 09 & 10 of HW 1.1 assuming they produce and sell 1,000 drum sets during the year. Remember to use 2 decimals for per unit" values. Total Dollars TrueBeat - Summarized connect given data Average Cost per Unit Direct materials Direct labor $ 90 Variable manufacturing overhead $ 35 Fixed manufacturing overhead $ Fixed selling & administrative expense Variable selling & administrative expenses 25 SA 239,000 7000+ 16000 + 42,000 33,000+ 36,000+ 170,000 Sales price per unit 516 2) Assume, due to the significant success of the drum sets, TrueBeat has obtained a contract to provide drum sets to a national merchandising chain. This contract is expected to increase TrueBeat's sales over the next 3 years. Current operations have a relevant range of 500 to 1,800 drum sets. TrueBeat's anticipates selling 3,000 units in Year 2, 5,000 units in Year 3 and 6,000 units in Year 4. Making the following cost changes, TrueBeat will increase their relevant range of production to between 4,000 and 8,000 drum sets. This significant increase to production will stair-step some of their costs. Specifically, the company will have to purchase additional equipment that will increase their machinery depreciation expense by 50% (Fixed overhead. The new equipment will allow TrueBeat to produce up to 10,000 drum sets a year. . With increased production levels, TrueBeat will need to pay shift premium to assembly workers such that the average Direct labor will increase by $18 a unit. Additionally, production supervisor will be hired for $120,000 (fixed overhead). Additionally, the company providing factory maintenance services has agreed to a new contract. The new contract will include a fixed component (overhead) equal to half of the original flat fee and a variable component (overhead) that will be $0.25 per assembly wage dollars The company needs to increase its sales staff. Rather than paying their sales staff commission only, TrueBeat will pay sales staff a flat salary (fixed S&A) equal to twice the amount paid in Year 1 and a reduced commission per drum set equal to 50% of the previous commission rate. 5) Base scenario calculations: Using the Profit Formula calculated in 5) above, calculate the following assuming TrueBeat produces and sells 6,000 units as their "base" scenario Sales Revenue 6.000 514 3.045,000 Net Operating Income 1,778.000 Contribution Margin 2002, Contribution Margin Contribution Margin percent 2.012,000/1,041,000 = 61.251 Break-even in units 304,000/(2012.-o/) 304,00) 347 976 units Break-even in dollars 3040/67.2552,05 Margin of safety in units 6.400- 176 5,124 mois Margin of safety percent (8.bo - 451,00 33/3916.00 = 25.40% Margin of safety in dollars 7.04h,000 -452,045 2,643,955 Degree of Operating Leverage 2,022,6/1,778,00 1.17 Looking at changes: TrueBeat is not confident their expenses will hold in ycar 4. Management wants to examine the potential impact of the following situations. Assume cach situation independent of one another. The Profit Formula and 6,000 units produced and sold for Year 4 as your "base" scenario. 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? Net Profit C Net sales - Lost of Production) b) What will the CM ratio and Break-Even point in units be with the labor increasc? Note - Requirement asks for CM ratio, NOT contribution margin in dollars or contribution per unit. Total Salse 5 16 1000516,000 Variable (osta 33,000+ (25x 1000 units) = $58,000 CM ratio. 516,000 - 58,000 - 0.987 I DOO Break then Point 415,000/ (516-58)= c) If they produce and sell the same number of units for Year 4, what will their new Net Operating 90.) Income, NOI, be? 516,000 - 415,000 - 58,000 = 43,000 d) How many units will TrueBeat need to sell to maintain the same operating income as originally planned for Year 4? 1000 units 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. 1) Conclusion: Use your calculation above, should TrucBcat be concerned about future costs increases? Make sure your answer uses complete sentences and includes 30 to 50 words to support your answer. 7) Changing sales price: Marketing research indicates that TrucBcat Company can sell more units of its product if they lower their sales price by 10% per unit. Remember to treat this scenario as independent from the items considered in 6. 464.4 a) Calculate the new (i) sales price and (ii) contribution margin per unit. i) new sales price 576 - V9.4 ii) CM per unit 295.4 14.1-1.245.4 iii) What will the new Profit formula be? Profit Formula (New sales price per unit- variable 20st) heed cost profit b) How many units will they need to sell to make the same operating income (NOI) as originally projected for year 4 (base assumption)? 43000 304000/295.4 = 1175 units appet. c) How many units will they need to sell to break-even at the new sales price? 304000/295.4 . 1024 units approx. d) If TrueBeat Company can sell 20% more units (2 times original units) with the decreased sales price, how much operating income will they make? 530,800 - 309.500 e 286.800 e) Conclusion: Using the information calculated above, should TrucBeat lower their sales price? Why or why not? Will their relevant range be an issue for this decision? Your answer should include full sentences and 30 to 50 words. True Beat should mostly not consider to induce their price if they estimate that their sales would hout increace, because with a reduction of price they have to sell more units than usual to break even which is a orky factor 8) Increase Fixed Costs: TrucBeat's management is also considering purchasing additional advertising is a huge company purchase the additional advertising? Your answer should use complete sentences and buuden to produce me be comida contain 30 to 50 words. Support your answer with calculations of at least 2 of the following itemsif they can Doll (2) Net Operating Income, (b) Break-even in units or dollars.(e) target sales in units or dollars to 2 Hats original maintain the same Net Income as originally assumed for year 4. You may also use other calculations unitary that you feel arc relevant. Remember to treat this scenario as independent from the items considered "bright idea in 6) and 7) True beot's managment should new additional advertising expence as it will give more operating profit. Their profit is increased by $29400. Not increased food cost increases pofit Increased fred cost 304000/516-19: 971 writi 3940001516-164 : 991 units 9) New Plant? Because TrucBeat's capacity is limited to 8,000 units in their current production facility, management would like to explore the impact of building a new production facility. The company is considering a new production facility and equipment that will decrease their variable expenses by 30% but increase fixed expenses by 50%. TrueBeat still plans to produce and sell the same number of units in Year 4 (base). The new plant will give them a relevant range of 5,000 to 12,000 units. a) If the new production facility is built, what would be the company's new (1) contribution margin per unit, (ii) fixed expenses and (iii) the new profit formula? Complete the table below. i) New CM per unit 6.000 ii) New Fixed expenses 450.000 iii) New profit formula 20110.000 - 156,0 = 1,734,000 breduce celing put sare selling Under New production facility New Break-even I 249 644.484 -0- New Year 4 6,000 Units Sales Revenue NOI b) Assume TrueBeat sells the same units as planned for Year 4 in the new plant, calculate the new margin of safety in (i) units) (ii) dollars and (iii) percent. i) MoS units ii) MoS dollars iii) MoS percent . Has margin of safety improved or declined? Explain/comment in 10 to 30 words. c) Calculate the degree of operating leverage. Has operating leverage improved or declined from the "base" calculation in 9)? Discuss in 10 to 30 words. d) Conclusion: If you were a member of top management, would you have been in favor of constructing the new plant? Explain in 30 to 50 words Under New production facility New Break-even New Year 4 6.000 Units Sales Revenue NOI -0- b) Assume TrueBeat sells the same units as planned for Year 4 in the new plant, calculate the new margin of safety in (i) units) (ii) dollars and (iii) percent. i) MoS units ii) MoS dollars iii) MoS percent Has margin of safety improved or declined? Explain/comment in 10 to 30 words. c) Calculate the degree of operating leverage. Has operating leverage improved or declined from the "base" calculation in 9)? Discuss in 10 to 30 words. d) Conclusion: If you were a member of top management, would you have been in favor of constructing the new plant? Explain in 30 to 50 words risk factor a huge 7) Changing sales price: Marketing research indicates that TrueBeat Company can sell more units of its product if they lower their sales price by 10% per unit Remember to treat this scenario as independent from the items considered in 6. a) Calculate the new sales price and (ii) contribution margin per unit. i) new sales price 64.9 516-101.64.4 ii) CM per unit -4.4 iii) What will the new Profit formula be? Profit Formula (New sales price per unit- variable 20st) fred cost profit b) How many units will they need to sell to make the same operating income (NOI) as originally projected for year 4 (base assumption)? 43000 304150 /15.43 175 itt a c) How many units will they need to sell to break-even at the new sales price? 304000/245.4 = 1024 units . d) If TrucBeat Company can sell 20% more units (2 times original units) with the decreased sales price, how much operating income will they make? 590,500 - 309.000 . 286.800 e) Conclusion: Using the information calculated above, should TrueBeat lower their sales price? Why or why not? Will their relevant range be an issue for this decision? Your answer should include full sentences and 30 to 50 words. True Beat should mostly not consider to spline the price if they estimate that their sales world not increase, becquce with a reduction of price, they have to sell more units than usual to break even which is a 8) Increase Fixed Costs: TrueBeat's management is also considering purchasing additional advertising for $40,000. Marketing studies suggest that sales will increase by 200 units a year. Should the thera bien to produce company purchase the additional advertising? Your answer should use complete sentences and me but can be contain 30 to 50 words. Support your answer with calculations of at least 2 of the following items if they cout seul planned maintain the same Net Income as originally assumed for year 4. You may also use other calculations unite that you feel are relevant. Remember to treat this scenario as independent from the items considered to bright idea in 6) and 7) True beat's mana pment should ineux additional advertising loveduce ding price since selling expence as it will give more operating profit. Their profit is increased by 829400. Not increased find cost Increased fired cost 304000/516-1673.971 unit 3440001516-164 941 units 9) New Plant? Because TrueBeat's capacity is limited to 8,000 units in their current production facility, management would like to explore the impact of building a new production facility. The company is considering a new production facility and equipment that will decrease their variable expenses by 30% but increase fixed expenses by 50%. TrueBeat still plans to produce and sell the same number of units in Year 4 (base). The new plant will give them a relevant range of 5,000 to 12,000 units. a) If the new production facility is built, what would be the company's new (1) contribution margin per unit, (ii) fixed expenses and (iii) the new profit formula? Complete the table below. i) New CM per unit ii) New Fixed expenses iii) New profit formula only b) Using absorption costing, prepare an absorption costing income statements for TrueBeat for Years 2, 3 and 4. Sales revenue Cost of Goods Sold Gross Margin S&A expenses Nct Onerating Income TrueBeat Income Statement Absorption Costing) For Y cars ending December 31 Year 2 Year 3 1.54 RDD 2.520. DINO 7151600 1192.600 932.60 1.387.5 DD 312.500 337,500 520.000 1,050.000 Year 4 3.196.DDD 1.322.000 1.764. 250.000 c) Do you think TrueBeat's decision to maintain drum sets inventory from year 2 until they are sold in year 3 was a good decision? Use complete sentences and 30 to 50 words in your answer. The net operating income in year is more than double, than your the decision tatem sem to be good de vision the wendy manufactured drum sett promils celotion to 4) TrueBeat expects production and sales levels to remain constant from year 4 onward at 6,000 drum Company finally sets. Write a Profit Formula for TrueBeat's operations using variable costing. NOI = Q x CM unit dem Shorela FC, where Q represents the number of units produced and sold, CM unit is the contribution margin pweding gore per unit and FC is the total fixed expenses. Tacame poche a) Profit formula Contribution maryn: Total Soles - Total variable expenses, Profita Contribution margin - Total b) Complete chart assuming the same number of units will be produced and sold. fred expenses Units Sales Variable Fixed produced/sold Revenue Expenses Expenses Profit/NOI 4.0002.06 676. DOD 204. DO 5.000 250.000 304,000 1.BLO 6,000 3,096ADD 4. DOD 304.100 1.778. 7.000 EX512 ILIRBODA 304. DOD 2.225.00 c) Prepare a Cost-Volume-Profit graph for TrueBeat Company (you can use the graph at the end of the assignment or create your own) i) Label both the x and y axis using appropriate increments. Dollar values should be used for they axis and number of units for the x axis. ii) Plot the Fixed Expense line. Label it. iii) Plot the Sales Revenue line and label it. iv) Plot the Total Expense line and label it. v) Indicate the Break-even Point on the graph and label it. vi) Shade and label the portion of the graph that indicates the company's positive profit. All other costs are considered consistent and within relevant range for production of 4,000 to 8,000 units. Use the information provided above to adjust amounts from the table in 1). Include the adjusted amounts in the table below. TrueBeat adjusted summarized data for production 4,000 to 8,000 units Adjust summarized data Average Cost Total per Unit Dollars Direct materials 19 Direct labor 103 Variable manufacturing overhead sl GOL Fixed manufacturing overhead $ 190.000 7000 + 3000+ 63,07 +110,000 Fixed selling & administrative expense 275.000 170,000 33,00 72,00 Variable selling & administrative expense $13.5 Sales price per unit $ $ Note: The table above may be submitted early for verification. Upload it to the "submission" drop box on D2L, email or text a photo or PDF to Teri and she will look at it before you continue with the project. 3) TrueBeat's management will need to produce 4,000 units in Years 2 and 3 (to meet relevant range) and 6,000 units in Year 4. However, they anticipate selling only 3,000 units in Year 2 but 5,000 units in Years 3 and 6,000 units in Year 4. They will have to carry inventory produced in Year 2 until it is sold in Year 3. Note: Net Operating Income, or NOI, for this course is essentially Income before interest or tax expense and represents the operationally controlled components of Net Income. a) Using variable costing and contribution margin income statement format, prepare predictive income statements for Years 2, 3 and 4 below. Sales revenue Variable production costs Variable S&A expenses Contribution Margin Fixed Overhead Fixed S&A expenses Net Operating Income TrueBeat Income Statement Variable Costing) For Years ending December 31 Year 2 Year 3 1548.000 2,580.000 56700D 945. DOO 27.500 62.500 94.500 1.5 72.500 198.000 198. DDO 275.D 275.000 470.500 1.099.500 Year 4 3.091.000 1. 134.000 75.000 1887.000 198.ODD 275.000 1) Summarize the information for TrueBeat from 09 & 10 of HW 1.1 assuming they produce and sell 1,000 drum sets during the year. Remember to use 2 decimals for per unit" values. Total Dollars TrueBeat - Summarized connect given data Average Cost per Unit Direct materials Direct labor $ 90 Variable manufacturing overhead $ 35 Fixed manufacturing overhead $ Fixed selling & administrative expense Variable selling & administrative expenses 25 SA 239,000 7000+ 16000 + 42,000 33,000+ 36,000+ 170,000 Sales price per unit 516 2) Assume, due to the significant success of the drum sets, TrueBeat has obtained a contract to provide drum sets to a national merchandising chain. This contract is expected to increase TrueBeat's sales over the next 3 years. Current operations have a relevant range of 500 to 1,800 drum sets. TrueBeat's anticipates selling 3,000 units in Year 2, 5,000 units in Year 3 and 6,000 units in Year 4. Making the following cost changes, TrueBeat will increase their relevant range of production to between 4,000 and 8,000 drum sets. This significant increase to production will stair-step some of their costs. Specifically, the company will have to purchase additional equipment that will increase their machinery depreciation expense by 50% (Fixed overhead. The new equipment will allow TrueBeat to produce up to 10,000 drum sets a year. . With increased production levels, TrueBeat will need to pay shift premium to assembly workers such that the average Direct labor will increase by $18 a unit. Additionally, production supervisor will be hired for $120,000 (fixed overhead). Additionally, the company providing factory maintenance services has agreed to a new contract. The new contract will include a fixed component (overhead) equal to half of the original flat fee and a variable component (overhead) that will be $0.25 per assembly wage dollars The company needs to increase its sales staff. Rather than paying their sales staff commission only, TrueBeat will pay sales staff a flat salary (fixed S&A) equal to twice the amount paid in Year 1 and a reduced commission per drum set equal to 50% of the previous commission rate. 5) Base scenario calculations: Using the Profit Formula calculated in 5) above, calculate the following assuming TrueBeat produces and sells 6,000 units as their "base" scenario Sales Revenue 6.000 514 3.045,000 Net Operating Income 1,778.000 Contribution Margin 2002, Contribution Margin Contribution Margin percent 2.012,000/1,041,000 = 61.251 Break-even in units 304,000/(2012.-o/) 304,00) 347 976 units Break-even in dollars 3040/67.2552,05 Margin of safety in units 6.400- 176 5,124 mois Margin of safety percent (8.bo - 451,00 33/3916.00 = 25.40% Margin of safety in dollars 7.04h,000 -452,045 2,643,955 Degree of Operating Leverage 2,022,6/1,778,00 1.17 Looking at changes: TrueBeat is not confident their expenses will hold in ycar 4. Management wants to examine the potential impact of the following situations. Assume cach situation independent of one another. The Profit Formula and 6,000 units produced and sold for Year 4 as your "base" scenario. 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? Net Profit C Net sales - Lost of Production) b) What will the CM ratio and Break-Even point in units be with the labor increasc? Note - Requirement asks for CM ratio, NOT contribution margin in dollars or contribution per unit. Total Salse 5 16 1000516,000 Variable (osta 33,000+ (25x 1000 units) = $58,000 CM ratio. 516,000 - 58,000 - 0.987 I DOO Break then Point 415,000/ (516-58)= c) If they produce and sell the same number of units for Year 4, what will their new Net Operating 90.) Income, NOI, be? 516,000 - 415,000 - 58,000 = 43,000 d) How many units will TrueBeat need to sell to maintain the same operating income as originally planned for Year 4? 1000 units 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. 1) Conclusion: Use your calculation above, should TrucBcat be concerned about future costs increases? Make sure your answer uses complete sentences and includes 30 to 50 words to support your answer. 7) Changing sales price: Marketing research indicates that TrucBcat Company can sell more units of its product if they lower their sales price by 10% per unit. Remember to treat this scenario as independent from the items considered in 6. 464.4 a) Calculate the new (i) sales price and (ii) contribution margin per unit. i) new sales price 576 - V9.4 ii) CM per unit 295.4 14.1-1.245.4 iii) What will the new Profit formula be? Profit Formula (New sales price per unit- variable 20st) heed cost profit b) How many units will they need to sell to make the same operating income (NOI) as originally projected for year 4 (base assumption)? 43000 304000/295.4 = 1175 units appet. c) How many units will they need to sell to break-even at the new sales price? 304000/295.4 . 1024 units approx. d) If TrueBeat Company can sell 20% more units (2 times original units) with the decreased sales price, how much operating income will they make? 530,800 - 309.500 e 286.800 e) Conclusion: Using the information calculated above, should TrucBeat lower their sales price? Why or why not? Will their relevant range be an issue for this decision? Your answer should include full sentences and 30 to 50 words. True Beat should mostly not consider to induce their price if they estimate that their sales would hout increace, because with a reduction of price they have to sell more units than usual to break even which is a orky factor 8) Increase Fixed Costs: TrucBeat's management is also considering purchasing additional advertising is a huge company purchase the additional advertising? Your answer should use complete sentences and buuden to produce me be comida contain 30 to 50 words. Support your answer with calculations of at least 2 of the following itemsif they can Doll (2) Net Operating Income, (b) Break-even in units or dollars.(e) target sales in units or dollars to 2 Hats original maintain the same Net Income as originally assumed for year 4. You may also use other calculations unitary that you feel arc relevant. Remember to treat this scenario as independent from the items considered "bright idea in 6) and 7) True beot's managment should new additional advertising expence as it will give more operating profit. Their profit is increased by $29400. Not increased food cost increases pofit Increased fred cost 304000/516-19: 971 writi 3940001516-164 : 991 units 9) New Plant? Because TrucBeat's capacity is limited to 8,000 units in their current production facility, management would like to explore the impact of building a new production facility. The company is considering a new production facility and equipment that will decrease their variable expenses by 30% but increase fixed expenses by 50%. TrueBeat still plans to produce and sell the same number of units in Year 4 (base). The new plant will give them a relevant range of 5,000 to 12,000 units. a) If the new production facility is built, what would be the company's new (1) contribution margin per unit, (ii) fixed expenses and (iii) the new profit formula? Complete the table below. i) New CM per unit 6.000 ii) New Fixed expenses 450.000 iii) New profit formula 20110.000 - 156,0 = 1,734,000 breduce celing put sare selling Under New production facility New Break-even I 249 644.484 -0- New Year 4 6,000 Units Sales Revenue NOI b) Assume TrueBeat sells the same units as planned for Year 4 in the new plant, calculate the new margin of safety in (i) units) (ii) dollars and (iii) percent. i) MoS units ii) MoS dollars iii) MoS percent . Has margin of safety improved or declined? Explain/comment in 10 to 30 words. c) Calculate the degree of operating leverage. Has operating leverage improved or declined from the "base" calculation in 9)? Discuss in 10 to 30 words. d) Conclusion: If you were a member of top management, would you have been in favor of constructing the new plant? Explain in 30 to 50 words