The marketing manager suggested that to improve EBITDA and increase sales volume, the Deluxe Loot Box should be sold at the same margin as the Standard Loot Box. Base your answers on the ABC calculations performed in Tab 3 to indicate how much Largo will need to charge for the Deluxe Loot Box. Indicate how many Deluxe Loot Boxes the company will have to sell at the new price to break even. Discuss whether changing the price is a viable option for Largo. Provide evidence from the Excel workbook, Tab 4.

Tab 1. Largo Global Production and Cost Information 2020 Product Type Standard Loot Box Deluxe Loot Box Volume (Number of Products) 80 20 100 Selling Price Per Unit 18.20 $ 27.85 Total Sales 1,456.00 557.00 $ 2,013.00 Cost of Sales 1 180 220 1400 Selling and Admin Charges 52.5 ;2.5 125 Depreciation 87 87 174 Purchases 1124.8 281.2 1406 Gross Profit 336 277 613 1 Determine Purchases 2020 Cost of Sale 1400 Plus: Closing Inventory 404 Less: Opening Inventory 398 Purchases 1406 2 Use traditional Allocation Method to Allocate Cost Allocated Cost Total Costs Standard Loot Box Deluxe Loot Box Purchases $ 1,406.00 $ 1,124.80 $ 281.20 Selling and General Admin 125 $ 62.50 52.5 Depreciation 174 $ 87.00 87 Total Cost of Products 1,705.00 5 ,274.30 $ 430.70 Number of Products 100 80 20 Cost per Prod S 17.05 $ 15.93 $ 21.54 3 Determine the Profit Margins per product Standard Loot Box Deluxe Loot Box Total Sales 1,456.00 $ 557.00 $ 2,013.00 Less: Cost of Products 1,274.30 5 430.70 $ 1,705.00 Profit 181.70 5 126.30 5 308.00 % Profit (Profit/ Sales) 12.48% 22.68% 15.30% Tab 2 1 Allocated the costs based on this new information Allocated Cost Standard Loot Box Deluxe Loot Box Total Purchases 913.90 $ 70.30 $ 984.20 Freight charges 210.90 $ 10.90 $ 421.80 Selling Costs 37.50 5 37.50 $ 75.00 General Admin Costs 25.00 5 25.00 5 50.00 Depreciation 87.00 $ 87.00 $ 174.00 Total Costs of Products 1,274.30 $ 430.70 5 1,705.00 Number of Products 80 20 100 Cost per Product 15.93 $ 21.54 $ 17.05 2 Determine the Profit Margins per product based on the allocations above Standard Loot Box Deluxe Loot Box Sales 1,456.00 $ 557.00 Less: Cost of Products 1,274.30 $ 430.70 Profit 181.70 5 126.30 % Profit (Profit/ Sales ) 12% 23%Tab 3 Manufacturing Deluxe Loot Box Sum of the Cost Cost of Standard Loot Cost of Deluxe Loot overhead $ Amount Cost driver Standard Loot Box Drivers Box Check Box Purchases 984.20 Number of units purchased BO 20 100 11.42 |$ 3.52 Freight charges 121.80 Kilometers travelled 1,000 4,000 5,000 0.21 0.05 Selling Costs 75.00 Number of sales orders 10 9.38 $ 6.25 Admin instrative Costs 50.00 Number of employees 2 3 5 12.50 B.33 Depreciation 174.00 Square Feet 2000 1000 3000 0.04 0.09 Total Allocated 1,705.00 costs 33.55 5 18.24 Allocated cost per unit 17.05 Number of Units sold 80 20 100 0.42 0.91 2. Use ABC costing determined in 1 above to calculate the profit and profit margins of the two products Standard Loot Box Deluxe Loot Box Total Sales 1,456.00 5 557.00 $ 2,013.00 Less: Costs 1,274.30 $ 430.70 5 1,705.00 Net (profit /loss) 181.70 $ 126.30 $ 308.00 Profit margin 12% 23% 15% Tab 4 1 Assume the Deluxe Product can be sold at the same profit margin as the Standard Product (See Tab 3). Calculate the New Selling Price for the Deluxe Product ? Allocated CPU 21.54 Profit margin as " 30% New Selling Price 30.62 2 Provide a Proof For your Claculation: Total $ Total 612.40 Less Costs 430.70 Profit 181.70 Calculate the New Breakeven Point in Volume based on the new Selling Price you detertmined above. You can 3 assume that only the Purcahses costs are Variable, all other costs are fixed $ Sales Price / unit 30.62 Variable Costs /unit 14.06 Marginal Cost / unit 16.56 Fixed Costs 149.5 Break Even