Problem 2 Phone Pro Phone Pro is planning to outsource its manufacturing of cell

Question

Problem 2 Phone Pro Phone Pro is planning to outsource its manufacturing of cell phones to Mumbai, India. It plans to construct a factory there with machinery capable of producing 600,000 phones per month at full capacity, however, they only plan to manufacture 400,000 phones per month initially. The planned selling price of a phone is $36.99                   Costs to produce   400,000 units are below: Direct materials $1,954,321 Direct Labor $2,854,321 Other Manufacturing Costs Variable $1,312,345 Fixed $3,812,345 Selling & Administration Costs Variable $1,156,789 Fixed $3,656,789 Compute the following: (Input Answers Below) a. Total Cost for 400,000 units per month a. b. Total Cost for 600,000 units per month b. c. Break even phone selling price for 400,000 units per month c. d. Break even phone selling price for 600,000 units per month d. e. Unit Gross Profit e. f. Gross Margin (%) f. g. Breakeven volume g. h. Average Cost per Unit for 400,000 units per month h. i.   Average Cost per Unit for 600,000 units per month i. j.   Net Margin (%) for 400,000 units per month j. k. Net Margin (%) for 600,000 units per month k. You must show work and intermediate steps for credit, using excel functions or formulas is the simplest way. Problem 2 Phone Pro Phone Pro is planning to outsource its manufacturing of cell phones to Mumbai, India. It plans to construct a factory there with machinery capable of producing 600,000 phones per month at full capacity, however, they only plan to manufacture 400,000 phones per month initially. The planned selling price of a phone is $36.99                   Costs to produce   400,000 units are below: Direct materials $1,954,321 Direct Labor $2,854,321 Other Manufacturing Costs Variable $1,312,345 Fixed $3,812,345 Selling & Administration Costs Variable $1,156,789 Fixed $3,656,789 Compute the following: (Input Answers Below) a. Total Cost for 400,000 units per month a. b. Total Cost for 600,000 units per month b. c. Break even phone selling price for 400,000 units per month c. d. Break even phone selling price for 600,000 units per month d. e. Unit Gross Profit e. f. Gross Margin (%) f. g. Breakeven volume g. h. Average Cost per Unit for 400,000 units per month h. i.   Average Cost per Unit for 600,000 units per month i. j.   Net Margin (%) for 400,000 units per month j. k. Net Margin (%) for 600,000 units per month k. You must show work and intermediate steps for credit, using excel functions or formulas is the simplest way.

Explanation / Answer

Ans

Workings

Sl No Details Units VC Per Unit Total VC   Fixed Mfg Cost Fixed Selling Cost Total Cost a Total cost for 400000 units per Month           4,00,000.00                  18.19         72,77,776.00          38,12,345.00             36,56,789.00      147,46,910.00 b Total cost for 600000 units per Month           6,00,000.00                  18.19       109,16,664.00          38,12,345.00             36,56,789.00      183,85,798.00 Details Units VC Per Unit Total VC   Fixed Mfg Cost Fixed Selling Cost Break Even Selling Price =(Fixed Cost /Total Units)+Variable Cost c Break even phone selling price for 400000 units           4,00,000.00                  18.19          38,12,345.00             36,56,789.00                    36.87 d Break even phone selling price for 600000 units           6,00,000.00                  18.19          38,12,345.00             36,56,789.00                    30.64 Details Units VC Per Unit Fixed Mfg Cost Fixed Selling Cost FC Per Unit=Fixed Mfg Cost+Fixed Selling Cost/Units Sales Price Unit Gross Profit=(SP-(VC+FC)   e Unit Gross Profit           4,00,000.00                  18.19         38,12,345.00          36,56,789.00                         18.67                    36.99                              0.12 Details Units Mfg VC Per Unit Fixed Mfg Cost Fixed Selling Cost FC Per Unit=Fixed Mfg Cost+Fixed Selling Cost/Units Sales Price Unit Gross Profit=SP-Mfg VC /SP*100 f Gross Margin % ( Considered only VC)           4,00,000.00                  15.30                    36.99 59% Details Fixed Mfg Cost Fixed Selling Cost Total FC Contribution Per Unit Break Even units=Total Fixed Cost/Contribution Per unit g Break Even Volume         38,12,345.00      36,56,789.00         74,69,134.00                      18.80               3,97,388.00 Details Units Fixed Mfg Cost Fixed Selling Cost Total FC FC per Unit VC Per Unit Average Cost Per Unit h Average cost Per unit for 400000           4,00,000.00      38,12,345.00         36,56,789.00          74,69,134.00                         18.67                    18.19                            36.87 i Average cost Per unit for 600000           6,00,000.00      38,12,345.00         36,56,789.00          74,69,134.00                         12.45                    18.19                            30.64 Details Units VC Per Unit Fixed Mfg Cost Fixed Selling Cost FC Per Unit=Fixed Mfg Cost+Fixed Selling Cost/Units Sales Price Unit Gross Profit=SP-Mfg VC /SP*100 j Net Margin % ( Considered only VC)           4,00,000.00                  18.19                    36.99 51% k Net Margin % ( Considered only VC)           6,00,000.00                  18.19                    36.99 51%

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