Complete the attached worksheet. You will need to show your work for each questi

Question

Complete the attached worksheet. You will need to show your work for each question

1) CircumSpect Products produces a home sentry system, easily installed by a homeowner, that they can produce and ship at a cost of $214 per unit. The company has fixed costs of $11,000 per month. The company believes it can position the product as an upscale specialty item and retail it for $995, or it can use a broader market strategy and sell it for $495. Calculate the required breakeven level of sales, to include $4,000 per month in profit, at each of these prices. Next, discuss their profit levels at each price, assuming they sell twice as many units as they need to in order to breakeven.

2) Serenity Senior Retirement Home has a capacity of 100 residents. It estimates that it has a variable cost of $450/month per resident (to include room, board, and personalized attention), and fixed costs of $5,700 per month. Assuming they operate at a 92% occupancy rate, what price per resident per month must they charge in order to earn a monthly profit of $8,000?

Explanation / Answer

Particulars Retailing as Upscale Broder Market Strategy Sales Price 995.00 495.00 Less: VariableCost 214.00 214.00 Conribution Margin 781.00 281.00 Fixed Expense 11000 11000 Conribution Margin 781 281 Break even Point 1 15.00 40.00 (Fixed Exp/CM) Fixed Expense+Profit 4000 15000 15000 Conribution Margin 781 281 Break even Point 20.00 54.00 (Fixed Exp/CM) Twice the Units of BEP1 Particulars Retailing as Upscale Broder Market Strategy Sales Price 29,850 39,600 Less: VariableCost 6,420 17,120 Conribution Margin 23,430 22,480 Fixed Expense 11,000 11,000 Net Operating Income 12,430 11,480 Net Income is higher in case of retailing as Upscale 2 Capacity of Residents 100 Occupancy Rate 92% Occupancy Residents 92 Calculation of Price Per Resident: Costs: PU Total Variable Cost: 450 41400 (450*92) Fixed Cost 5700 Total Costs 47100 Add: Monthly Profit to be Earned 8000 Total Desired Revenue 55100 Occupancy Residents 92 Price Per Resident 598.91

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