price as cue Also assume that Greentown\'s capacity limitation is 60,000 transpo
ID: 2527257 • Letter: P
Question
price as cue Also assume that Greentown's capacity limitation is 60,000 transport selvi Based on the calculation of optimum selling prices in (b) above but with the capacity and demand assumptions taken into consideration, calculate the maximum profits that Greentown can earn and the customer mix and quantity by which that profit can be achieved. c. (Weight of this exercise in the overall exam grade: 2/6) Exercise 2 o companies of about the same size and operating in the same sector, WNelson Inc and JCash & Co are tw but with very different business models. WNelson has privileged a more conservative products manufactured internally, while the management of JCash has recently engaged a strategy of structure with aggressive outsourcing. Here below are the Income statements of the two companies for the year ending December 31, 2010Explanation / Answer
Operating leverage = Quantity * (price - variable cost per unit) / Quantity * (price - variable cost per unit) - fixed costs
b) Income statement for 2011
With a decrease in the volume of sales, the profits of Nelson have reduced more than that of JCash.
c)
Due to a decrease in selling pruce, the effect is the same for both companies as the profits have become zero for both of them. This shows the volume has a major impact on the profitability.
d)
The operating profits have increased for both companies in 2011 as a result of increase in volume but the increase is higher for WNelson.
W Nelson Jcash Quanity 1,00,000 1,00,000 Price per unit $18 $18 variable cost per unit $3 $10.5 Contribution margin per unit $15 $8 Fixed costs $13,20,000 $5,70,000 Operating leverage 8.33 4.17Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.