A strike at a major supplier has caused a shortage of materials, so the current year’s production and sales are limited to 140,000 units. Top management is unable to reduce fixed cost (from original total) to partially offset the effect of the reduced sales on profits. Variable cost per unit is the same as last year (see above). The company has already sold 40,000 units at a selling price of $40 per unit. How much of the fixed cost was covered by the total contribution margin of the first 40,000 units sold? What contribution margin per unit will be needed on the remaining 100,000 units to cover the remaining fixed costs and to earn a target profit of $300,000 this year? What would be your recommended selling price, assuming your variable cost are held constant, based upon your findings in (b)? 3. A strike at a major supplier has caused a shortage of materials, so thecurrent year's production and sales are limited to 140,000 units. Topmanagement is unable to reduce fixed cost (from original total) to partiallyoffset the effect of the reduced sales on profits. Variable cost per unit is thesame as last year (see above). The company has already sold 40,000 units ata selling price of $40 per unit.a. How much of the fixed cost was covered by the total contribution margin ofthe first 40,000 units sold?b. What contribution margin per unit will be needed on the remaining 100,000units to cover the remaining fixed costs and to earn a target profit of$300,000 this year?c. What would be your recommended selling price, assuming your variable costare held constant, based upon your findings in (b)?с.

Solution 3-a The amount of fixed cost was covered under the total contribution margin of…

Answered: A strike at a major supplier has caused…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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1. A strike at a major supplier has caused a shortage of materials, so the current year’s production and sales are limited to 140,000 units. Top management is unable to reduce fixed cost (from original total) to partially offset the effect of the reduced sales on profits. Variable cost per unit is the same as last year (see above). The company has already sold 40,000 units at a selling price of $40 per unit.
1. How much of the fixed cost was covered by the total contribution margin of the first 40,000 units sold?
1. What contribution margin per unit will be needed on the remaining 100,000 units to cover the remaining fixed costs and to earn a target profit of $300,000 this year?
1. What would be your recommended selling price, assuming your variable cost are held constant, based upon your findings in (b)?

3. A strike at a major supplier has caused a shortage of materials, so the
current year's production and sales are limited to 140,000 units. Top
management is unable to reduce fixed cost (from original total) to partially
offset the effect of the reduced sales on profits. Variable cost per unit is the
same as last year (see above). The company has already sold 40,000 units at
a selling price of $40 per unit.
a. How much of the fixed cost was covered by the total contribution margin of
the first 40,000 units sold?
b. What contribution margin per unit will be needed on the remaining 100,000
units to cover the remaining fixed costs and to earn a target profit of
$300,000 this year?
c. What would be your recommended selling price, assuming your variable cost
are held constant, based upon your findings in (b)?
с.

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