Question

For a table manufacturing company, selling price for a table is $177.00 per Unit, Variable cost is $29.00 per Unit, rent is $3,391.00 per month and insurance is $288.00 per month. Company wants to expand its business and improve the table quality, it wants to increase the selling price for a table to $318.00 per Unit, Variable cost to $57.00 per Unit, bigger area will have rent $5,972.00 per month and insurance is $400.00 per month At what point will the company be indifferent between the current mode of operation and the new option?

A vendor prepares 100.00 hotdogs every day and sells at $18.00 /piece. For each hot dog, he spends $10.00 in the raw material. Additionally he spends $1.81 for packing each hotdog and monthly $52.00, $23.00, $8.00 as food truck rent, electricity and other expenses respectively. Lost sales are charged at $4.00 per lost sale. Leftover hotdogs can be sold for $3.On a particular day in June 105.00 people came wanting to buy a hotdog. Determine the vendor’s profit for that day? Assume there are 30 days in the month.

Please Please Please help!

Answer 1

For the table manufacturing company:

We are given the following information:

Particular	Remark	Original	Expansion
SP	Per unit	$     171.00	$     253.00
VC	Per unit	$       29.00	$       47.00
Rent	Per Month	$ 4,171.00	$ 5,260.00
Insurance	Per Month	$     270.00	$     357.00

We need to find the monthly sales in units that will make the profits of each of these options equal and therefore the company will be indifferent between the two, so we need to equate the following equations to find the required number of units:

• 
  (SP - VC) x units = rent + insurance + profitoriginal
  
  • 
    (171 - 29) x units = 4171 +270+ profitoriginal
    
• 
  (SP-VC) x units = rent + insurance + profiterpansion
  
  • 
    253 – 47) x units = 5260 +357 + profiterpansion
    
• 
  profiterpansion = profitoriginal
  
  • 
    (171 – 29) x units – 4171 – 270 = (253 – 47) x units - 5260 - 357
    
  • 
    units = 18.375
    
  • As furniture can't be in decimals, we have to round it up to next highest integer which is 19 units
• To verify, we may calculate the profits under both the options with 19 units of goods sold

  • Particular	Remark	Original	Expansion
    SP	Per unit	$      171.00	$      253.00
    VC	Per unit	$         29.00	$         47.00
    Rent	Per Month	$   4,171.00	$   5,260.00
    Insurance	Per Month	$      270.00	$      357.00
    Units sold	Per Month	19.00	19.00
    Profit	As per equation	$ -1,743.00	$ -1,703.00

  • We can see that the difference in profits is not too high. if we use the exact number 18.375 then these two numbers are exactly the same

  • Particular	Remark	Original	Expansion
    SP	Per unit	$      171.00	$      253.00
    VC	Per unit	$         29.00	$         47.00
    Rent	Per Month	$   4,171.00	$   5,260.00
    Insurance	Per Month	$      270.00	$      357.00
    Units sold	Per Month	18.375	18.375
    Profit	As per equation	$ -1,831.75	$ -1,831.75

  • And the annual number is 18.375 x 12 = 220.50 units

Hotdog vendor:

We have calculated the profit in the below table:

Particular	Remark	Numbers	Daily Number	Explanation of Daily Number
Prepared hotdogs	Given	100.000	100.00	Day sales of 100 hotdogs is given
SP	Per unit	$       18.00	$              18.00	remains constant
R/m	Per unit	$       11.00	$              11.00	remains constant
Packaging	Per unit	$         1.07	$                1.07	remains constant
Rent	Per Month	$       46.00	$                1.53	46/30 = 1.53
Electricity	Per Month	$       23.00	$                0.77	23/30 = 0.77
Other Exp	Per Month	13.000	$                0.43	13/30 = 0.43
Customers visited	Given	115.000	115.000	remains constant
Lost sales units		15.000	15.000	115-100 = 15
Charges of lost sales		90.000	90.000	150 x 6 = 90
Profit			$            500.27	100 x (18-11-1.07)-1.53-0.77-0.43-90=500.27

So the daily profit is $500.27