Molly Jasper and her sister got into the novelities business almost by accident.

Question

Molly Jasper and her sister got into the novelities business almost by accident. Over time the figurines they made are now called Mollycaits. The demand grew over time. The day came when a buyer for a major department store offered them a contract to produce 1,500 figurines of various designs for $10,000.Molly and Caitlain realized that it was time to get down to business.To make bookkeeping simpler,Molly had priced all the figurines at $8.00.Variable operating costs amounted to an average of $6.00 per unit.To produce the order,Molly and Caitlain would have to rent industrail facilities for a month,which would cost them $4,000. A.calculate Mollycaits operating breakeven point B. Calculate Mollycaits EBIT on the department store order C. If Molly renegotiates the contract at a price of $10.00 per figurine,what will the EBIT be? D. If the store refuses to pay more then $8.00 per unit but is willing to negotiate quantity, what quantity of figurines will result in an EBIT of $4,000. E. At this time,Mollycaints come in 15 different varieties.Whereas the average variety cost per unit is $6.00,the actual cost varies from unit to unit.What recommendation would you have for Molly and Caitlain with regard to pricing and/or the numnbers and types of units that they offer to sell.

Explanation / Answer

a) profit = 8*x - 6*x - 4000 break even profit = 0 2x -4000 = 0 x=2000 b) 2*1500 - 4000 = -1000 c) 10*x-6*x-4000= 4*x - 4000 = 4*1500-4000 = 2000 d) 2*x-4000=4000 2x = 8000 x= 4000 units e) make more of the lower cost items or charge more for the more expensive types

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