2. 6 points]. As a new engineer at Fisher Price, you are eager to understand the

Question

2. 6 points]. As a new engineer at Fisher Price, you are eager to understand the nuances of the two product lines for which you are now responsible. You have only been able to collect limited data for each of these products and therefore need to make some calculations to complete your knowledge Consider each product line presented below and calculate the specific value in which you are interested a. [3 points] Toy for babies aged 0-3 years: last year there was $270,000 in sales from the 9,000 units sold. You were able to determine that variable expense totaled $162,000 and fixed expenses totaled $90,000. You would like to calculate the following . 1.5 points] Contribution margin per unit i. 1.5 points] Net income [3 points] Toy for children aged 5-8 years: last year there was $100,000 in sales from the 5,000 units sold. You have been able to ascertain that there were $82,000 in fixed expenses and there was a net loss of $12,000 recorded. You would like to calculate the following: b. i. ii. [1.5 points] Total variable expenses [1.5 points] Contribution margin per unit

Explanation / Answer

(a)

Unit Selling price = $270,000 / 9,000 = $30

Unit variable cost = $162,000 / 9,000 = $18

(i) Unit contribution margin = Selling price - Unit variable cost = $30 - $18 = $12

(ii) Net income = Revenue - Variable expense - Fixed expense = $(270,000 - 162,000 - 90,000) = $18,000

(b)

(i) Total variable expense = Revenue - Fixed expense + Net loss = $(100,000 - 82,000 + 12,000) = $30,000

(ii)

Unit Selling price = $100,000 / 5,000 = $20

Unit variable cost = $30,000 / 5,000 = $6

Unit contribution margin = Selling price - Unit variable cost = $20 - $6 = $14

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