Neptune Company produces toys and other items for use in beach and resort areas.

Question

Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $2.60 per unit. Enough capacity exists in the company's plant to produce 30, 000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.66. and fixed expenses associated with the toy would total $41,800 per month. The company's Marketing Department predicts that demand for the new toy will exceed the 30.000 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $2,090 per month. Variable expenses in the rented facility would total $1.82 per unit, due to somewhat less efficient operations than in the main plant.

Explanation / Answer

1 Breake even sales Unit price Amount in $ A.Sales 2.6 146299 B.variable expenses 1.82 102410 C.contribution(D+E) 0.78 43890 D.fixed expenses(41800+2090) 43890 E.Income 0 we can do the reverse working for the answer In breake even sales profit will be '0' So fixed Expense +profit =Contribution Now we got the contribution we have the contibution per unit also that is sales -variable cost per unit(its given on question it self) so so unit for contribution is =43890/.78 That is 56269 So Answer is Break even sales is 56269 and Dollar value is 146299 2 Sales for getting 9750 $ profit Unit price Amount in $ A.Sales(contribution$/contribution per unit*2.6 ) 2.6 178799.4 +68769*2.6 B.variable expenses(contribution$/contribution per unit*1.82 ) 1.82 125159.6 +53640/.78*1.82 C.contribution(D+E) 0.78 53640 +53640/.78 D.fixed expenses(41800+2090) 43890 E.Income 9750 we can do the reverse working for the answer Its same like 1 Answer Total unit sold for earning 9750$ profit is 68769('+53640/.78) Total sale value is 178799.4$ 3 Breake even sales quantity 56269 Profit required 43890*25% 10973 So Commission to sales manager 20% on profit('10973*20%) 2743 Go through reverse working A.Sales(contribution$/contribution per unit*2.6 ) 2.6 192020.4 contribution per unit *2.6 B.variable expenses(contribution$/contribution per unit*1.82 ) 1.82 134414.3 contribution per unit *1.82 C.contribution(D+E+F) 0.78 57606 contribution per unit =57606/.78 73854 D.fixed expenses(41800+2090) 43890 E.commission(F*20%) 2743 F.Income(43890*25%) 10973 If sales manager getting a 20% commission on profit then the quantity to get 25% of earning on Fixed expenses is 73854

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