Answer to 1. | ||
Cost of goods sold | ||
units | cost of goods sold | |
Highest observed lebel (june) | 8400 | 526932 |
Lowest observed level (may) | 5700 | 378594 |
Change | 2700 | 148338 |
The variable cost p.u is $ 54.94 (148338/2700) | ||
Fixed cost of goods sold is $65,436 | ||
Cost equation for cost of goods sold Y= 54.94x+65436 | ||
where Y is total cost of goods sold and X is no. of units | ||
Shipping Expense | ||
units | Shipping Expense | |
Highest observed lebel (june) | 8400 | 65000 |
Lowest observed level (may) | 5700 | 53600 |
Change | 2700 | 11400 |
The variable cost p.u is 4.22 (11400/2700) | ||
Fixed cost is $29,552 | ||
Cost Equation for shipping expenses sold is Y=4.22x+29552 | ||
where Y is total cost of goods sold and X is no. of units | ||
Salaries & commission expense | ||
units | Salaries & commission expense | |
Highest observed lebel (june) | 8400 | 171500 |
Lowest observed level (may) | 5700 | 137000 |
Change | 2700 | 34500 |
The variable cost p.u is 12.77 (34500/2700) | ||
Fixed cost is $ 64,232 | ||
Cost equation for Salaries & commission expenses sold is Y=12.77x+64232 | ||
where Y is total cost of goods sold and X is no. of units | ||
Answer to 2 | ||
Break Even Sales= Total fixed costs/ contribution margin p.u | ||
Total fixed Costs per month | ||
COGS | $ 65,436 | |
Shipping Expenses' | $ 29,552 | |
Salaries & commission expense | $ 64,232 | |
Insurance | $ 15,000 | |
advertisement | $ 88,000 | |
Amortisation | $ 48,000 | |
Total | 310220 | |
Total fixed cost for the year =310220*12 is $37,22,640 | ||
Calculation of contribution margin ratio | ||
Sale price | $ 123.00 | |
Less: Varaiable costs | ||
COGS | $ 54.94 | |
Shipping Expenses' | $ 4.22 | |
Salaries & commission expense | $ 12.77 | |
Contribution margin | $ 51.07 | |
Break even sales =31722640/51.07 | ||
=72893 units | ||
Annual profit when 79000 units are sold | ||
Contribution margin | $ 40,34,530 | |
(51.07*79000) | ||
Less: foxed Costs | $ 37,22,640 | |
Annual profit | $ 3,11,890 | |
Answer to 3 | ||
New Sales units (79000+7400) | 86400 | |
New Sales price p.u | $ 112.50 | |
Revised Contribution p.u | $ 40.57 | |
Total Contribution | $ 35,05,248.00 | |
Less: fixed costs annually | $ 37,22,640.00 | |
Profit | $ -2,17,392.00 | |
Previous profit when 79000 units were sold | $ 3,11,890 | |
Change in profit | $ -5,29,282.00 | |
Answer to 4 | ||
Revised Fixed Costs | $ 50,66,640 | |
(assuming advertising expenses is increased by $ 1,12,000 every month) | ||
Revised total contribution | $ 44,12,448 | |
(79000+7400)*51.07 | ||
Total Profit | $ -6,54,192 | |
Previous profit when 79000 units were sold | $ 3,11,890 | |
Change in profit | $ -9,66,082 | |
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