Our team is hired by Apple to help assess whether or not to continue to manufacture and sell an older model of the iPhone. Apple explains that this model continues to sell well in foreign markets but it worries that fixed costs are so large that it is difficult to earn a profit. The Tableau Dashboard is provided to aid our analysis of this model.
TOTAL FIXED COSTS:
factory expense = $10,250,000
production manager salaries = $8,500,000
insurance expense = $6,000,000
equipment (straight-line) depreciation expense = $5,350,000
advertising expense = $5,000,000
VARIABLE COSTS PER UNIT:
battery = $10
camera = $45
internal components = $90
receiver = $35
screen = $95
speaker = $25
SALES PRICE PER UNIT:
iphone sales price per unit $750
Answer the requirements for each of the following separate
situations.
1. If Apple expects sales of 100,000 units,
compute its margin of safety (a) in dollars and (b) as a percent of
expected sales.
Total fixed costs = Factory expense + Production manager salaries + Insurance expense + Equipment depreciation expense + Advertising expense
= $10,250,000 + $8,500,000 + $6,000,000 + $5,350,000 + $5,000,000
= $35,100,000
Variable cost per unit = Battery + Camera + Internal components + Receiver + Screen + Speaker
= $10 + $45 + $90 + $35 + $95 + $25
= $300
Contribution margin per unit = Selling price per unit - Variable costs per unit
= $750 - $300
= $450
Contribution margin ratio = Contribution margin per unit / Selling price per unit
= $450 / $750
= 0.6
Break-even sales dollars = Fixed costs / Contribution margin ratio
= $35,100,000 / 0.6
= $58,500,000
1 (a) Margin of safety in dollars = Sales - Break-even sales
= (100,000 * $750) - $58,500,000
= $16,500,000
(b) Margin of safety as s percent of expected sales = Margin of safety in dollars / Sales
= $16,500,000 / (100,000 * $750)
= 0.22
Our team is hired by Apple to help assess whether or not to continue to manufacture...
Our team is hired by Apple to help assess whether or not to continue to manufacture and sell an older model of the iPhone. Apple explains that this model continues to sell well in foreign markets but it worries that fixed costs are so large that it is difficult to earn a profit. The Tableau Dashboard is provided to aid our analysis of this model. TOTAL FIXED COSTS: factory expense = $10,250,000 production manager salaries = $8,500000 insurance expense =...
Factory Rent Expense - $10,250,000 Peoduction Manager Salaries - $8,500,000 Insurance Expense - $6,000,000 Equipment Depreciation Expense - $5,350,000 Advertising Expense - $5,000,000 Battery - $10 Camera - $45 Internal components - $90 Reciever - $35 Screen - $95 Speaker - $25 Sales Price Unit - $750 connect.mheducation.com/flow/connect.html Saved Help Save & Exits Check my Our team is hired by Apple to help assess whether or not to continue to manufacture and sell an older model of the IPhone Apple...
Factory Rent Expense: $10,250,000 Insurance Expense: $6,000,000 Equipment Depreciation Expense: $5,350,000 Production Manager Salaries: $8,500,000 Advertising Expense: $5,000,000 Battery: $10 Camera: $45 Internal Components: $90 Receiver: $35 Screen: $95 Speaker: $25 Sales Price Per Unit: $750 Check my Our team is hired by Apple to help assess whether or not to continue to manufacture and sell an older model of the IPhone Apple explains that this model continues to sell well in foreign markets but it worries that fixed costs...
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