A. (25 pts) If the price is set at $4.50, how many lipsticks do they need to sell to breakeven? B. (25 pts) If the price is set at $4.50, how many lipsticks do they need to sell to earn a target profit of $100,000? C. (25 pts) Given a price of $4.50, how many lipsticks must they sell to earn a target profit of $100.000 pluS cover a $200.000 advertising
A. (25 pts) If the price is set at $4.50, how many lipsticks do they need to sell to breakeven? B. (25 pts) If the price is set at $4.50, how many lipsticks do they need to sell to earn a target profit of $100,000? C. (25 pts) Given a price of $4.50, how many lipsticks must they sell to earn a target profit of $100.000 pluS cover a $200.000 advertising
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A-D IF POSSIBLE SHOWING CALUCLATIONS
Transcribed Image Text:CVP Exam
Adorable Face is considering a new line of lipstick products. They
would like to know if it will pay off. Estimated fixed costs are
$250,000, and the manufacturing, materials, shipping and packaging
cost (variable cost) per lipstick is $1.00. Show all calculations.
A. (25 pts) If the price is set at $4.50, how many lipsticks do they
need to sell to breakeven?
B. (25 pts) If the price is set at $4.50, how many lipsticks do they
need to sell to earn a target profit of $100,000?
C. (25 pts) Given a price of $4.50, how many lipsticks must they sell
to earn a target profit of $100,000 plus cover a $200,000 advertising
budget?
D. (25 pts) If they sell 80,000 lipsticks, what price should they charge
(maintaining the $100,000 target profit and $200,000 advertising
budget)?
Extra credit (10 pts) Given a price of $4.50, what is the markup on
retail? What is the markup on cost?
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