Please help me answer. Neptune Company produces toys and other items for use in
ID: 2465741 • Letter: P
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Please help me answer.
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 $3 per unit. Enough capacity exists in the company's plant to produce 16.000 units of the toy each month. Variable expenses to manufacture and sell one unit would be S1.25. and fixed expenses associated with the toy would total $35,000 per month. The company's Marketing Department predicts that demand for the new toy will exceed the 16.000 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $1,000 per month. Variable expenses in the rented facility would total $1.40 per unit, due to somewhat less efficient operations than in the main plant. Required: Compute the monthly break-even point for the newtoy in unit sales and in dollar sales. (Do not round intermediate calculations.) How many units must be sold each month to make a monthly profit of $12,000? (Do not round intermediate calculations.) If the sales manager receives a bonus of 10 cents for each unit sold in excess of the break-even point, how many units must be sold each month to earn a return of 25% on the monthly investment in fixed expenses? (Do not round intermediate calculations.)Explanation / Answer
Details Amt $ In The exisiting facility Unit Sales Price 3.00 Unit Variable cost 1.25 Unit Contribution Margin 1.75 CM Ratio=1.75/3= 58.33% Total Contribution from 16000 units 28,000.00 New Facility Unit Sales Price 3.00 Unit Variable cost 1.40 Unit Contribution Margin 1.60 Both Facilities Together Total Fixed expense /month 36,000.00 Contribution from Existing facilty= 28,000.00 Contribution required from New facility= 8,000.0 Unit Contribution Margin new facility 1.6 Required units new facility= 5,000.0 1.0 So Monthly BEP in Units =16000+5000= 21,000.0 Monthly BEP $ Sales =21000*3= 63,000.0 2.0 Required monthly profit 12,000.0 Add Total fixed cost per month 36,000.0 Total Montly contribution required= 48,000.0 Monthly contribution from 16000 units of exisiting facility= 28,000.0 Additional Contribution required from new facility= 20,000.0 Unit Contribution Margin new facility 1.6 Required No Of Units from new facility 12,500.0 So Total required units =16000+12500= 28,500.0 3.0 Required earning @25% of Fixed expense= 9,000.0 Add: Fixed cost 36,000.0 Total monthly contribution required= 45,000.0 Additional contribution required above Fixed costs= 9,000.0 Sales commission to sales Manager = 0.1 per unit Contribution per unit above BEP= 1.5 Required Units to be sold above BEP=9000/1.5= 6,000.0 Total Units to be sold=BEP units+6000 =21000+6000= 27,000.0 units
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