Roman & Clive Grills Roman and Clive have a plan to manufacture barbeque grills.

Question

Roman & Clive Grills

Roman and Clive have a plan to manufacture barbeque grills. They are writing their business plan for Roman & Clive Grills in order to get investors and have put together the following costs:
Rent: $10,000/month
Packaging: $7 per grill
Equipment: $75,000
Staff Salaries: $12,000/month
Assembly and manufacturing labor: $16/hour
Raw materials: $100/grill
Utilities: $1,000/month
Outsourced painting: $30/grill
Insurance: $5,000/year
Scrap rate on raw materials and packaging: 1%
Time to manufacture and assemble 1 grill: 90 minutes

a.     What are RC Grills fixed costs?

b.     What are RC Grills total variable costs per unit?

c.     Comparable grills are priced at $300. If RC Grills matches that price and hopes to breakeven their first year, how many do they need to make and sell? (Breakeven point is where Fixed costs + variable costs = revenue, meaning the point where revenue covers exactly both fixed and variable costs with no profit.)

d.     Assuming their workers work a typical 40 hours work week and are allowed three weeks off for vacation and holidays, how many assemblers must they hire?

Explanation / Answer

a)TOTAL FIXED COST = RENT+STAFF SLARIES+ UTILITIES + INSURANCE

= 10000+ 12000 + 1000 + 5000

= $28000 PER MONTH

b)TOTAL VARIABLE COST P.U. = PACKAGING + ASSEMBLING & MANUFACTURING LABOR + RAW MATERIALS + OUTSOURCED PAINTING

= 7+ (1.3*16) + 100 + 30

= 157.80 PER GRILL

c) CONTRIBUTION PER UNIT = SELLING PRICE

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