Question
Toy Box Inc. is contemplating expanding sales of their children's toys. They have an opportunity to stock and sell the X toy that has been
Toy Box Inc. is contemplating expanding sales of their children's toys. They have an opportunity to stock and sell the X toy that has been a big hit with children everywhere. They need to order the X toys from the manufacturer in a minimum order of 100 at a cost of $12 each. They can resell the X toy in their store for $22 each. Due to anticipated demand, Toy Box Inc. will need to hire an additional part-time cashier at $600 a month which will be classified as a fixed-cost attributable to the X toy. Also, they have offered a $1 sales commission per toy to their floor sales representative. They will also include a package of trading cards with every purchase of an X toy, which will cost them an additional $2 each. Required: To make the project worthwhile, Toy Box Inc. would need to achieve a $5,000 profit per month. What level of sales, in units and in dollars, would be required to reach this target profit? Show all computations completely in a table inserted into your document. Assume that the venture is undertaken and an order is placed for 100 X toys. What would be Toy Box's break-even point in units and in sales dollars? Show computations completely in an inserted table, and explain the reasoning behind your answer. You can ignore the fixed cost of $600 for this part. Assuming it would not affect sales, how would your answer to #2 change if the company did not offer the $2 trading cards as part of the deal?
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