What to submit: Excel file containing the model and the answer A hardware compan

Question

What to submit: Excel file containing the model and the answer A hardware company sells a lot of low-cost, high-volume products. For one such product, it is equally likely that annual unit sales will be low or high. If sales are low (60,000), the company can sell the product for $10 per unit. If sales are high (100,000), a competitor will enter and the company will be able to sell the product for only $8 per unit. The variable cost per unit has a 25% chance of being $6, a 50% chance of being $7.50, and a 25% chance of being $9. Annual fixed costs are $30,000. Use simulation to estimate the company's expected annual profit.

Explanation / Answer

Details Qty/Amt $ Expected sales volume=0.50*60000+0.50*100000                   80,000 Expected sales revenue=0.5*60000*10+0.5*100000*8                 700,000 Expceted Unit variable cost =0.25*6+0.50*7.5+0.25*9 $                   7.50 Total Expected variable cost for 80,000 units =                 600,000 Annual Profit Calculation Details Amt $ Expected Sales Revenue                 700,000 Less Expected variable costs                 600,000 Expected Contribution Margin                 100,000 Less Fixed costs                   30,000 Expected Annual Profit                     70,000

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.