To prepare for a new business venture selling Toys, Ryan James enrolls in busine
ID: 2709880 • Letter: T
Question
To prepare for a new business venture selling Toys, Ryan James enrolls in business courses at the local community college, spending $4800 on the tuition. He also purchases business equipment at a cost of $15,000, and spends $3,000 on marketing expenses. For each toy sold, it costs Ryan $2.00 for materials and labor and $0.50 for website fees. Using the skills he learned in his business courses, Ryan decides to charge $9.95 for each toy.
How many toys would have to be sold in order to break even?
If Ryan sells 20 Toys per day, how many days would it take to break even?
Ryan’s competitors start to lose business and respond by cutting their prices. While Ryan’s daily sales are steady at 20 units at the current price for the first 30 days, he realizes that he will have to cut his prices down to $8.95 after the initial 30 days in order to keep the demand level at 20 units/day. How long will it take for Ryan to break even?
It is now 3 months (90 days) after the price decrease, and Ryan still has not been able to break even. Since the amount he needs to make up was borrowed from his father, not breaking even means not being able to repay the loan. His friend tom offers to lend $2,000 for a new round of advertising on Facebook. With this new advertising campaign and the price still at $8.95, Ryan doubles his daily sales to 40. How long will it take him to pay repay the loan from her father and to pay back Tom?
Please list all decsion variables, functions, constraints for excel solver
Explanation / Answer
Contribution per toy = (9.95-2-0.5) = 7.45 per toy
Fixed expense incurred = (4800+15000+3000) = $22800
No of toys to be sold to break even = $22800/7.45 = 3060 toys
If 20 toys are sold per day, no of days to break even = 3060/20 = 153 days
Now, for the first 30 days 20 units are sold therefore contribution earned = 600 toys * 7.45 = $4470
Additional contribution required to be earned = $22800-$4470 = $18330
Revised contribution after price cut = (8.95-2-0.5) = 6.45 per toys
Additional toys to be sold to break even = 18330/6.45 = 2842 toys
Additional No of days to break even = 2842/20 = 142 days
Total no of days require to break even = 142+20 = 162 days
Toys sold till 90 days = 90*20 = 1800 toys
Contribution earned from 1800 toys sold = (600*7.45)+(1200*6.45)= $12210
Additional contribution reqd to break even without including loan from friend = (22800-12210) = $10590
Additional contribution reqd to break even including loan from friend = (22800+2000-12210) = $12590
No of toys to be sold to break even without including loan from friend = $10590/6.45 = 1642 toys
No of toys to be sold to break even including loan from friend = $12590/6.45 = 1952 toys
Additional days required to repay loan from father after 90 days= 1642/40 = 41 days i.e Total days = (90+41) 131 days
Days required to pay back tom = 1952/40 = 49 days
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