Question

As you know from your pre-class work, W.T. needs to determine how much he'l charge the Customers of My Assistant. Keep in mind that he'll need to (1) cover costs and (2) earn a profit so he can be paid. Part 1 We've already done quite a bit of work on projected costs for My Assistant, so pull out your notes from Class #2. To recap, W.T.'s planning on the following: Newspaper ad Social media manager Payment collection Gas $120 per month $100 per month: $1 per job scheduled $0.75 per job $4.00 per job Considering his analysis of similar services and to keep things simple, W.T. plans to price all jobs the same and charge $15 per Job. Because of this flat rate, he anticipates he'll likely need to create different types of "jobs". For example, purchasing a list of items at the grocery store would be one job, while a bundle of 2-3 small errands such as picking up dry cleaning and prescriptions, might be considered one job. We'll deal with those details later. For now, assume that all jobs are priced at $15 each and all have the associated variable expenses listed above.

Answer 1

Calculation of Variable and Fixed cost Variable Particulars Cost Newspaper ad Social Media Manager $1.00 Payment Collection $0.75 Gas $4.00 Total $5.75 Fixed Cost $120.00 $100.00 $220.00 Contribution Margin = Sales - Variable Cost Contribution Margin = $15 - $5.75= $9.25 Ans 1 $400.00 Fixed Cost + Desired Profit Contribution Margin per job $220.00 + $9.25 67 Jobs Ans 2 Required Units x Sales price per unit Sales in dollars required to earn the desired profit $1,005 $15.00 67 x Check your work Total Sales Less: Variable Cost Total Contribution Margin Less: Total Fixed Costs Total Profit $1,005.00 [67 x $15] $385.25 [67 x $5.75] $619.75 $220.00 $399.75 The profit is not excatly $400 because of to earn a profit of $400 67.03 jobs need to be done. Since job cannot be done in part, hence the profit is not exactly $400