Essay about Study Guide

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COMPANY BACKGROUND: EasyFind manufactures and sells golf balls. The company is conducting a price test to find a better price point. Presently their golf balls sell for $19 per dozen. Their current volume is 5,470 dozen per month. They are considering reducing their sales price by 20% per dozen. QUESTION 1: What are EasyFind's total current revenues per month? $19 * 5,470 = $103,930 [+/- $3,118] Total Revenues = Price * Volume QUESTION 2: If EasyFind's variable costs are $10 per dozen, what is their total contribution each month at current prices? ($19 - 10) * 5,470 = $49,230 [+/- $1,477] Total contribution = Unit Contribution * units sold QUESTION 3: What will be EasyFind's new price if they choose to implement the price…show more content…
How many copies per issue (units) was Kai selling? ($372 + 500) / ($2.21 - $0.83) = 632 [+/- 19] Volume (units) = (Fixed Cost + Profit) / (Selling Price - Variable Cost). QUESTION 2: What total contribution is required to cover the new fixed costs and earn $500 profit per issue? $372 + $135 + 500 = $1,007 [+/- $30] Total contribution needed to cover the old fixed costs + new fixed cost + profit is just the three factors added together. QUESTION 3: What price increase would be required to cover the increase in cost of hiring the press if unit volume (copies per issue) remain the same? $135 / 632 = $0.21 [+/- $0.01] The price increase must be enough to cover the additional fixed cost, so we just need to know what that fixed cost is per copy sold. This equals the additional fixed costs / number of copies sold. QUESTION 4: Kai decides to add color and keep his price the same. This will increase variable costs by $0.40 per issue. What will be the new unit volume (copies per issue) required to maintain $500 profits and cover the increased fixed and variable costs? ($372 + $135 + 500) / ($2.21 - ($0.83 + .40)) = 1,028 [+/- 31] Divide the new total fixed costs plus profit by the new contribution margin. QUESTION 5: Kai decides to keep his price the same and add color, increasing variable costs by $0.40 per issue. What is the percent increase in unit volume (copies per issue) required to maintain $500 profits and cover the increased fixed and variable

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