Question
We recently started a fictional business URMask, selling non-medical masks to the UofR community. Business started up on January 1, 2021 when we all returned
We recently started a fictional business URMask, selling non-medical masks to the UofR community. Business started up on January 1, 2021 when we all returned to regular classes (yes this is future oriented and wishful thinking but let's go with this). Key information:
- Selling price is now set at $12.00 each.
- Masks are purchased in bulk at a cost of $5.75 each.
- We are renting a kiosk near the food court at a cost of $1,400 per month.
- We hired an administrator - manager at a fixed salary of $1,600 per month.
- Students handle sales on a commission basis for $2.25 per mask (no hourly wage).
- During the first three months, sales averaged 1,000 masks per month.
a) What are unit and total monthly contribution margin and CMR? Show calculations.
b) Prepare a variable costing income statement for the first 3 months
c) Calculate monthly breakeven in units and revenue (use separate formulae for each).
d) Calculate the margin of safety in units and dollars
e) A new kiosk is available starting April 2021 at a cost of $3,000 per month. From this better location we estimate an increase in sales revenue of $3,600 per month. Should we take the deal and move to the new location? Show calculations / explain answer.
f) A new supplier has offered to sell us cheaper masks at a cost of $3.00. If we switch over to the new masks we would drop our price to $10. Should we do it? Show calculations / explain answer
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