Chapter 8, Problem 3FPC

Staci Valekbegan dabbling in pottery several years ago as a hobby. Her work is quite creative, and it has been so popular with friends and others that she has decided to quit her job with an aerospace company and manufacture pottery full time. The salary from Staci’s aerospace job is $3,800 per month. Staci will rent a small building near her home to use as a place for manufacturing the pottery. The rent will be $500 per month. She estimates that the cost of clay and glaze will be $2 for each finished piece of pottery. She will hire workers to produce the pottery at a labor rate of $8 per pot. To sell her pots, Staci feels that she must advertise heavily in the local area. An advertising agency states that it will handle all advertising for a fee of $600 per month. Staci’s brother will sell the pots; he will be paid a commission of $4 for each pot sold. Equipment needed to manufacture the pots will be rented at a cost of $300 per month. Staci has already paid the legal and fi ling fees…

Jenny was thrilled that her new car not only had leather seats but also had seat coolers to keep her and her co- pilot comfortable even in the heat of the summer. She felt it was worth it to upgrade for this feature, even though this technology added $700 to the price tag of her vehicle. This purchase also allows Jenny to understand the true value of this product from both the customer and employee side. You see, she worked in the accounting department of the seat cooler component manufacturer, so she was used to thinking about the costs and profitability of this component. Since she could now personally appreciate the product, she decided to take a closer look at last year’s financial performance of these seat coolers as follows: Sales $ 35,000,000 Cost of Goods Sold 22,950,000 Gross Margin 12,050,000 Selling, general & administrative expenses 5,015,000 Operating income $ $ 7,035,000 During that year, the company sold 50,000 units, where one unit…

Staci Valek began dabbling in pottery several years ago as a hobby. Her work is quite creative, and it hasbeen so popular with friends and others that she has decided to quit her job with an aerospace company andmanufacture pottery full time. The salary from Staci’s aerospace job is $3,800 per month.Staci will rent a small building near her home to use as a place for manufacturing the pottery. Therent will be $500 per month. She estimates that the cost of clay and glaze will be $2 for each finishedpiece of pottery. She will hire workers to produce the pottery at a labor rate of $8 per pot. To sell herpots, Staci feels that she must advertise heavily in the local area. An advertising agency states that it willhandle all advertising for a fee of $600 per month. Staci’s brother will sell the pots; he will be paid acommission of $4 for each pot sold. Equipment needed to manufacture the pots will be rented at a costof $300 per month.Staci has already paid the legal and filing fees…