10. The owners have set a target profit of $25,000 per month ($300,000 per year) in order for them to decide to devote themselves full time to JW Sports Supplies. Realizing from their projected incomestatements that their current predictions fall short of the $25,000, they want to evaluate the impact of alternative actions. Specifically, they want to evaluate each of the following factors, separately (in doingso, assume all other factors stay the same as projected in the income statement):What price must the company set to achieve a profit of $25,000 per month?What must the VC per unit be to achieve a profit of $25,000 per month?How many units must it sell to achieve a profit of $25,000 per month?What must total monthly FCs be to achieve a profit of $25,000 per month?11. The company is considering making a deluxe model. Its price would be $156, and its VC per unit would be $100, compared to a price of $100 and a VC of $60 for the basic model. It anticipates a sales mixof 60% basic model and 40% deluxe model. How many units of the basic model and how many units of the deluxe model must the company sell to break even?

Analyzing Profitability at JW Sports SuppliesThe prompt describes JW Sports Supplies evaluating…

Answered: 10. The owners have set a target profit…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The owner of a small printing company is considering the purchase of additional printing equipment to expand her business. If the owner expands the business and sales are high, projected profits (minus the cost of the equipment) should be $90,000; if sales are low, projected profits should be $40,000. If the equipment is not purchased, projected profits should be $70,000 if sales are high and $50,000 if sales are low. Consider Decision Tree Analysis If the owner is optimistic about the company's future sales, should the company expand by purchasing the equipment? Is the owner's optimism or pessimism about sales the only factor that may impact the company's profits?
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The owner of a small printing company is considering the purchase of additional printing equipment to expand her business. If the owner expands the business and sales are high, projected profits (minus the cost of the equipment) should be $90,000; if sales are low, projected profits should be $40,000. If the equipment is not purchased, projected profits should be $70,000 if sales are high and $50,000 if sales are low. Consider Decision Tree Analysis Are there options other than the purchase of additional equipment that should be considered in making the decision to expand the business? The equipment to be purchased is known in the industry to have a useful life of five years. How might this impact the printing company?
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