### Neptune Company: Production and Break-even Analysis Neptune Company is introducing a new inflatable toy. Key details regarding production and cost estimation are as follows: - **Pricing and Cost Structure**: - Selling Price: $3 per unit. - Variable Expenses: $100 per month. - Incremental Fixed Expenses: $22,000 per month. - An external supplier can produce the toy for $1.75 per unit with a fixed monthly fee of $15,000 for a production volume up to 20,000 units. For 20,001 to 40,000 units, the fee rises to $30,000. - **Capacity and Production Plan**: - The projected sales volume will range from 18,000 to 35,000 units. - Neptune's plan includes in-house manufacture of 18,000 units. #### Required Analysis: 1. **Break-even Analysis**: - Calculate the break-even point in unit sales assuming Neptune does not hire an external supplier. 2. **Profit Calculation**: - Determine profit if Neptune: a. Produces and sells 18,000 units. b. Outsources production without manufacturing in-house. 3. **Mixed Production Strategy**: - Calculate the break-even point in unit sales assuming Neptune manufactures 18,000 units in-house and outsources additional units up to 17,000. 4. **Target Profit Analysis**: - Determine necessary sales to achieve a $16,500 profit, assuming mixed production strategy. 5. **Sales and Additional Bonuses**: - Calculate profit if sales reach 35,000 units with a marketing manager bonus of $0.10 per unit sold above the break-even point from requirement 3. On this web page, we present a detailed table outlining the various financial metrics and analyses for a company's product sales strategy. The table includes: 1. **Break-even point in unit sales - without hiring** - Represented in "units." 2. **Profit if produces and sells** - Section 2a: Specific data represented in "units." 3. **Break-even point in unit sales - hiring** - Represented in "units." 4. **Profit if outsources production and sells** - Section 3a: Specific data represented in "units." 5. **Total unit sales** - Section 4a: Calculated in "units." 6. **Total unit sales to achieve a target profit of $16,500** - Section 4b: Represented in "units." 7. **Net operating income** - Section 4c: Represented in "units." 8. **Net operating income + bonus to marketing manager** - Section 4d: Represented in "units." 9. **Net operating income - fully outsourced** - Section 5: Represented in "units." The column headings are aligned with their respective labels, all indicating the output as "units." This structure allows users to clearly understand the potential outcomes and financial implications of different sales strategies within the company.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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### Neptune Company: Production and Break-even Analysis

Neptune Company is introducing a new inflatable toy. Key details regarding production and cost estimation are as follows:

- **Pricing and Cost Structure**:
  - Selling Price: $3 per unit.
  - Variable Expenses: $100 per month.
  - Incremental Fixed Expenses: $22,000 per month.
  - An external supplier can produce the toy for $1.75 per unit with a fixed monthly fee of $15,000 for a production volume up to 20,000 units. For 20,001 to 40,000 units, the fee rises to $30,000.

- **Capacity and Production Plan**:
  - The projected sales volume will range from 18,000 to 35,000 units.
  - Neptune's plan includes in-house manufacture of 18,000 units.

#### Required Analysis:

1. **Break-even Analysis**:
   - Calculate the break-even point in unit sales assuming Neptune does not hire an external supplier.

2. **Profit Calculation**:
   - Determine profit if Neptune:
     a. Produces and sells 18,000 units.
     b. Outsources production without manufacturing in-house.

3. **Mixed Production Strategy**:
   - Calculate the break-even point in unit sales assuming Neptune manufactures 18,000 units in-house and outsources additional units up to 17,000.

4. **Target Profit Analysis**:
   - Determine necessary sales to achieve a $16,500 profit, assuming mixed production strategy.

5. **Sales and Additional Bonuses**:
   - Calculate profit if sales reach 35,000 units with a marketing manager bonus of $0.10 per unit sold above the break-even point from requirement 3.
Transcribed Image Text:### Neptune Company: Production and Break-even Analysis Neptune Company is introducing a new inflatable toy. Key details regarding production and cost estimation are as follows: - **Pricing and Cost Structure**: - Selling Price: $3 per unit. - Variable Expenses: $100 per month. - Incremental Fixed Expenses: $22,000 per month. - An external supplier can produce the toy for $1.75 per unit with a fixed monthly fee of $15,000 for a production volume up to 20,000 units. For 20,001 to 40,000 units, the fee rises to $30,000. - **Capacity and Production Plan**: - The projected sales volume will range from 18,000 to 35,000 units. - Neptune's plan includes in-house manufacture of 18,000 units. #### Required Analysis: 1. **Break-even Analysis**: - Calculate the break-even point in unit sales assuming Neptune does not hire an external supplier. 2. **Profit Calculation**: - Determine profit if Neptune: a. Produces and sells 18,000 units. b. Outsources production without manufacturing in-house. 3. **Mixed Production Strategy**: - Calculate the break-even point in unit sales assuming Neptune manufactures 18,000 units in-house and outsources additional units up to 17,000. 4. **Target Profit Analysis**: - Determine necessary sales to achieve a $16,500 profit, assuming mixed production strategy. 5. **Sales and Additional Bonuses**: - Calculate profit if sales reach 35,000 units with a marketing manager bonus of $0.10 per unit sold above the break-even point from requirement 3.
On this web page, we present a detailed table outlining the various financial metrics and analyses for a company's product sales strategy. The table includes:

1. **Break-even point in unit sales - without hiring**
   - Represented in "units."

2. **Profit if produces and sells**
   - Section 2a: Specific data represented in "units."

3. **Break-even point in unit sales - hiring**
   - Represented in "units."

4. **Profit if outsources production and sells**
   - Section 3a: Specific data represented in "units."

5. **Total unit sales**
   - Section 4a: Calculated in "units."

6. **Total unit sales to achieve a target profit of $16,500**
   - Section 4b: Represented in "units."

7. **Net operating income**
   - Section 4c: Represented in "units."

8. **Net operating income + bonus to marketing manager**
   - Section 4d: Represented in "units."

9. **Net operating income - fully outsourced**
   - Section 5: Represented in "units."

The column headings are aligned with their respective labels, all indicating the output as "units." This structure allows users to clearly understand the potential outcomes and financial implications of different sales strategies within the company.
Transcribed Image Text:On this web page, we present a detailed table outlining the various financial metrics and analyses for a company's product sales strategy. The table includes: 1. **Break-even point in unit sales - without hiring** - Represented in "units." 2. **Profit if produces and sells** - Section 2a: Specific data represented in "units." 3. **Break-even point in unit sales - hiring** - Represented in "units." 4. **Profit if outsources production and sells** - Section 3a: Specific data represented in "units." 5. **Total unit sales** - Section 4a: Calculated in "units." 6. **Total unit sales to achieve a target profit of $16,500** - Section 4b: Represented in "units." 7. **Net operating income** - Section 4c: Represented in "units." 8. **Net operating income + bonus to marketing manager** - Section 4d: Represented in "units." 9. **Net operating income - fully outsourced** - Section 5: Represented in "units." The column headings are aligned with their respective labels, all indicating the output as "units." This structure allows users to clearly understand the potential outcomes and financial implications of different sales strategies within the company.
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