Contribution margin per basket = Selling price per basket - Variable cost per basket = 26 - 16 | 10 | |
Baskets needed to sell = ( Fixed cost + Desired operating income ) / Contribution margin per basket = ( 13400 + 30500 ) / 10 | 4390 | baskets |
Let us first calculate the operating income earned last year by selling 4190 baskets. | |
Sales ( 4190 * 26 ) | 108940 |
(-) Variable cost ( 4190 * 16 ) | 67040 |
Contribution margin | 41900 |
(-) Fixed costs | 13400 |
Operating income | 28500 |
This year she wants to earn 30500 in operating income. | |
Additional operating income to be earned = 30500 - 28500 | 2000 |
1. Raise selling price per unit to = Current selling price + ( Additional operating income to be earned / Baskets to be sold ) = 26 + ( 2000 / 4190 ) | 26.48 |
2. Reduce variable cost per unit to = Current variable cost per unit - ( Additional operating income to be earned / Baskets to be sold ) = 16 - ( 2000 / 4190 ) | 15.52 |
3. Reduce fixed cost to = Current fixed costs - Additional operating income to be earned = 13400 - 2000 | 11400 |
Exercise 3-5 Three years ago, Marissa Moore started a business that creates and delivers holiday and...
Three years ago, Marissa Moore started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Marissa sells the baskets for $34 each, and her variable costs are $24 per basket. She incurs $11,700 in fixed costs each year. V Your answer is correct. How many baskets will Marissa have to sell this year if she wants to earn $28,300 in operating income? (Round answer to 0 decimal places, e.g. 5,275.) 4000 baskets...
Three years ago, Marissa Moore started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Marissa sells the baskets for $29 each, and her variable costs are $19 per basket. She incurs $12,100 in fixed costs each year. (a) Your answer is correct. How many baskets will Marissa have to sell this year if she wants to earn $28,400 in operating income? (Round answer to 0 decimal places, e.g. 5,275.) 4050 baskets...
Three years ago, Marissa Moore started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Marissa sells the baskets for $25 each, and her variable costs are $15 per basket. She incurs $13,800 in fixed costs each year. Last year, Marissa sold 4,020 baskets, and she believes that demand this year will be stable at 4,020 baskets. The following are the actions Marissa could take if she wants to earn $28,400 in...
Three years ago, Marissa Moore started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Marissa sells the baskets for $33 each, and her variable costs are $23 per basket. She incurs $13,100 in fixed costs each year. Last year, Marissa sold 3,980 baskets, and she believes that demand this year will be stable at 3,980 baskets. The following are the actions Marissa could take if she wants to earn $28,700 in...
Three years ago, Sandra Robinson started a business that creates and delivers holiday and birthday gift baskets to students at the local university, Sandra sells the baskets for $29 each and her variable costs are $19 per basket. She incurs $15,000 in fixed costs each year. (a) Your answer is correct. How many baskets will Sandra have to sell this year if she wants to earn $41,000 in operating income? (Round answer to o decimal places, e.g. 5,275.) 5600 baskets...
Three years ago, Jennifer Davis started a business that creates and delivers holiday abd birthday gift baskets to students at the local university. Jennifer sells the baskets for $25 each, and her variable costs are $15 per basket. She incurs $12,000 in fixed costs each year. (a) Your answer is correct. How many baskets will Jennifer have to sell this year if she wants to earn $24,000 in operating income? (Round answer too decimal places, e.g. 5,275.) 3600 baskets 17...
Three years ago, Debra King started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Debra sells the baskets for $34 each, and her variable costs are $24 per basket. She incurs $24,000 in fixed costs each year. Last year, Debra sold 5,000 baskets, and she believes that demand this year will be stable at 5,000 baskets. The following are the actions Debra could take if she wants to earn $31,000 in...
Question 4 of 4 4.16/6.25 View Policies Show Attempt History Current Attempt in Progress Three years ago, Mary Smith started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Mary sells the baskets for $25 each, and her variable costs are $15 per basket. She incurs $10,000 in fixed costs each year. (a) Your answer is correct. How many baskets will Mary have to sell this year if she wants to earn...
0.5/1 0.5/1 Question 2 View Policies Show Attempt History Current Attempt in Progress Three years ago, Marissa Moore started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Marissa sells the baskets for $26 each, and her variable costs are $16 per basket. She incurs $12,400 in fixed costs each year. Your answer is correct. How many baskets will Marissa have to sell this year if she wants to earn $28,100 in...
(b) Last year, Karen sold 5,000 baskets, and she believes that demand this year will be stable at 5,000 baskets. The following are the actions Karen could take if she wants to earn $35,000 in operating income by selling only 5,000 baskets. Consider each action independently. (Round per unit answers to 2 decimal places, es. 52.75 and fixed cost to decimal places, eg. 5,275.) $ 1. Raise selling price per unit to $ 2. Reduce variable costs per unit to...