KNS estimates that if he purchases the new equipment and lowers his price to P44.55 per item, his volume will increase to about 4,700 units per month. Based on the local market, that is the largest volume he can realistically expect. WHAT SHOULD KNS DO?
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- Kylies Cookies is considering the purchase of a larger oven that will cost $2,200 and will increase her fixed costs by $59. What would happen if she purchased the new oven to realize the variable cost savings of $0.10 per cookie, and what would happen if she raised her price by just $0.20? She feels confident that such a small price increase will decrease the sales by only 25 units and may help her offset the increase in fixed costs. Given the following current prices how would the break-even in units and dollars change if she doesnt increase the selling price and if she does increase the selling price? Complete the monthly contribution margin income statement for each of these cases.Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?Joe Georgie, owner of Georgie Manufacturing, is consideringwhether to produce a new product. He has considered theoperations requirements for the product as well as the marketpotential. Joe estimates the fixed costs per year to be Php2,000,000 and variable costs for each unit produced to be Php2,500.(a) If Joe sells the product at a price of Php 3,500, how many unitsof product does he have to sell in order to break even? Use boththe algebraic and graphical approaches.(b) If Joe sells 3000 units at the product price of Php 3,500, whatwill be his contribution to profit?
- A grower estimates that if he picks his apple crop now, he will obtain 1000 boxes of apples, which he can sell at $30 per box. However, he thinks his crop will increase by 120 boxes of apples for each week he delays picking, but that the price will drop at a rate of $1.50 per box per week; in addition, he estimates that approximately 20 boxes per week will spoil for each week he delays picking. (a) When should he pick his crop to obtain the largest total cash return? How much will he receive for his crop at that time? (b) Build a spreadsheet to calculate the profit for 0, 1, 2, …, 6 weeks.Daniel is interested in entering the orange farming business. He estimates if he enters this business, his fixed costs would be P50,000 per year and his variable costs would equal 40 percent of sales. If each orange sells for P2, how many oranges would Daniel need to sell to generate a profit that is equal to 10 percent of sales?It is Jan 1, 2022 and Jasmine is evaluating her financial results from last year. She sold one product for $60 each and sold 1,500 units. Her variable costs totaled $60,000, while fixed costs worked out to $10 per unit. Jasmine is considering buying new equipment which would lower her per-unit variable cost by one-quarter. However, her fixed costs would double. In this situation, she would increase prices by $5 per unit and she projects that her sales total will drop by 10%. Give Jasmine some business advice, including break-even analysis and margin of safety. Explain the changes in Jasmine’s CVP graph when transitioning from the first to the second scenario
- Straight-Line is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are shown below. What will be the impact on the break-even point if Straight-Line purchases the new computer? What will be the impact on net operating income if Straight-Line purchases the new computer? What would be your recommendation to Staight-Line regarding this purchase? Units sold 1400 Sales price per unit $ 225 Variable cost per unit $ 145 Fixed costs $ 52,000 Break-even in units 650 Contribution margin ratio 0.36 Break-even in dollars $ 146,250 Sales $ 315,000 Variable costs $ 203,000 Fixed costs $…Hyperion, Inc. currently sells its latest high-speed color printer, the Hyper 500, for $350. It plans to lower the price to $300 next year. Its cost of goods sold for the Hyper 500 is $200 per unit, and thi year's sales are expected to be 20,000 units.a) Suppose that if Hyperion drops the price to $300 immediatley, it can increase this year's sales by 25% to 25,000 units. What would be the incremental impact on this eyar's EBIT of such a price drop?b) Suppose that for each printer sold, Hyperion expects additional sales of $75 per year on ink cartridges for the next years, and Hyperion has a gross profit margin of 70% on ink cartridges. What is the incremntal impact on EBIT for the next three years of a priced drop this year?Kath is considering investing 500,000.00 to open a Milk Tea Station near a mall. Based on her feasibility study, she can sell 12 large size of milk tea per hour at a price of 25.00 per bottle. She is planning to hire 2 crews, with an hourly rate of 25.00, to manage the store which will operate 8hours per day, 6 days per week, and 50 weeks per year. However, additional out-of-pocket miscellaneous cost is 8,500.00 per month. More so, she wanted to have her crews a 2-week vacation every year with pay. If the capital now is earning 15% annually and she must write off her investment within 5 years with desire rate of return of at least 20% on his investment, would you recommend the investment? Use the rate of return method and annual worth method in making your decision.
- Ingrid is planning to expand her business by taking on a new product that costs $7.56. In order to market this new product, $1307.00 must be spent on advertising. The suggested retail price for the product is $11.31. (a) If a price of $14.49 is chosen, how many units does she need to sell to break even? (b) If advertising is increased to $1674.00, and the price is kept at $11.31, how many units does she need to sell to break even?The ABC Corporation is considering introducing a new product, which will require buying new equipment for a monthly payment of $5,000. Each unit produced can be sold for $20.00. ABC incurs a variable cost of $10.00 per unit. How many units must ABC sell each month to break even?Crow Corporation, a company that specializes in precision metal fabrication, is conducting a study to determine if it should update equipment now or later. If the cost 2 years from now is estimated to be $260,000, how much can the company afford to spend now if its minimum attractive rate of return is 12% per year compounded monthly?