Hansaben Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company's MarketingDepartment estimates that demand for the new toy will range between 20,000 units and 35,000 units per month. The new toy will sellfor $9.00 per unit. Enough capacity exists in the company's plant to produce 25,000 units of the toy each month. Variable expenses tomanufacture and sell one unit would be $5.00, and incremental fixed expenses associated with the toy would total $30,000 permonth.Neptune has also identified an outside supplier who could produce the toy for a price of $4.00 per unit plus a fixed fee of $71,000 permonth for any production volume up to 25,000 units. For a production volume between 25,001 and 55,000 units the fixed fee wouldincrease to a total of $142,000 per month.Required:1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier.Note: Do not round your intermediate calculations.2. How much profit will Neptune earn assuming:a. It produces and sells 25,000 units.b. It does not produce any units and instead outsources the production of 25,000 units to the outside supplier and then sellsthose units to its customers.3. Calculate the break-even point in unit sales assuming that Neptune plans to use all of its production capacity to produce the first25,000 units that it sells and that it also commits to hiring the outside supplier to produce up to 10,000 additional units.4. Assume that Neptune plans to use all of its production capacity to produce the first 25,000 units that it sells and that it also commitsto hiring the outside supplier to produce up to 10,000 additional units.a. What total unit sales would Neptune need to achieve in order to equal the profit earned in requirement 2a?b. What total unit sales would Neptune need to achieve in order to attain a target profit of $72,500 per month?c. How much profit will Neptune earn if it sells 35,000 units per month?d. How much profit will Neptune earn if it sells 35,000 units per month and agrees to pay its marketing manager a bonus of 20cents for each unit sold above the break-even point from requirement 3?5. If Neptune outsources all production to the outside supplier, how much profit will the company earn if it sells 35,000 units?2a. Profit if produces and sells1. Break-even point in unit sales - without hiring2b. Profit if outsources production and sells3. Break-even point in unit sales - hiring4a. Total unit sales4b. Total unit sales to achieve a target Profit of $72,5004c. Net operating income4d. Net operating income - bonus to marketing manager7,500 units$ 70,000unitsunitsunits

Breakeven point in unit sales is computed as = Fixed expenses / CM per unitNet Profit is computed as…

Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company's Marketing Department estimates that demand for the new toy will range between 20,000 units and 35,000 units per month. The new toy will se For $9.00 per unit. Enough capacity exists in the company's plant to produce 25,000 units of the toy each month. Variable expenses t manufacture and sell one unit would be $5.00, and incremental fixed expenses associated with the toy would total $30,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $4.00 per unit plus a fixed fee of $71,000 per month for any production volume up to 25,000 units. For a production volume between 25,001 and 55,000 units the fixed fee would increase to a total of $142,000 per month. Required: 1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier.

Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company's Marketing Department estimates that demand for the new toy will range between 20,000 units and 35,000 units per month. The new toy will se For $9.00 per unit. Enough capacity exists in the company's plant to produce 25,000 units of the toy each month. Variable expenses t manufacture and sell one unit would be $5.00, and incremental fixed expenses associated with the toy would total $30,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $4.00 per unit plus a fixed fee of $71,000 per month for any production volume up to 25,000 units. For a production volume between 25,001 and 55,000 units the fixed fee would increase to a total of $142,000 per month. Required: 1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier.

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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