Customers-R-Us, LLC had sales and costs as shown below in 2013. Any data that is
ID: 2634649 • Letter: C
Question
Customers-R-Us, LLC had sales and costs as shown below in 2013. Any data that is not listed should be considered as zero. Note that the parts are produced in lots of 10,000, so the setup costs are incurred each time that 10,000 parts needs to be produced. a What total costs (variable plus fixed) will be incurred in 2013? b What profit will be achieved in 2013 c What is the break even quantity in 2013? d If the quantity, fixed cost and the variable costs stay the same and only the price is changed, what price would have to be charged to earn profits of $250,000? 2013 Sold units 30,000 Unit Price $23.50 Material Cost each $1.75 Labor cost each $4.25 Lot size 10,000 Setup cost per lot $500.00 Annual Fixed Cost $450,000 Customers-R-Us, LLC had sales and costs as shown below in 2013. Any data that is not listed should be considered as zero. Note that the parts are produced in lots of 10,000, so the setup costs are incurred each time that 10,000 parts needs to be produced. a What total costs (variable plus fixed) will be incurred in 2013? b What profit will be achieved in 2013 c What is the break even quantity in 2013? d If the quantity, fixed cost and the variable costs stay the same and only the price is changed, what price would have to be charged to earn profits of $250,000? 2013 Sold units 30,000 Unit Price $23.50 Material Cost each $1.75 Labor cost each $4.25 Lot size 10,000 Setup cost per lot $500.00 Annual Fixed Cost $450,000Explanation / Answer
Break even point in 2013
Total Cost Incurred in 2013 = Fixed cost +variable Cost
= 450000+181500
= $631500
Deriving Selling Price
Net profit $ 250000
Setup Cost = $1500
VAriable Cost =LAbour cost = $4.25 =30000*4.25= $127500
MAterail Cost = $1.75 = 30000*1.75 = $52500
VAriable Cost = 52500+127500+1500 = $181500
To calculate the Selling Price to earn a profit of $250000, we need to alculate the MArkup percentage value
Markup percentage value = Net profit/ Cost of Goods Sold *100
=250000/181500*100
= 1.378
= multiplying Initial selling price with markup percentage , we arrive at new Selling price
= 23.5x 1.378
= $32.38
PARTICULARS UNIT PRICE($) tOTAL AMOUNT($) sales(30000 units) 23.5 705000 less Variable cost material Cost 1.75 52500 Labour Cost 4.25 127500 Setup cost($500 ncurred for eah lot of 10000 0.05(1500/30000) 1500 Contribution MArgin (705000-52500+127500+1500) 523500 Fixed Cost 450000 Break even point in units 450000/(23.5- 1.75+4.25+0.05)= 25641 units Net profit (523500-450000)= 73500Related Questions
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