Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed price on- demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell each rack so that it can have a product profit margin of 28%? FIXED COSTS Research and Design Manufacturing Distribution Year 1 Year 2 Year 3 Year 4 Year 5 ТOTALS P 200,000 P 50,000 30,000 P 230,000 50,000 50,000 20,000 30,000 50,000 50,000 250,000 20,000 80,000 20,000 20,000 20,000 100,000 20,000 25,000 Customer Service 30,000 25,000 P 375,000 P 175,000 P 125,000 P 125,000 P 115,000 P 915,000 50,000 210,000 Other incremental operating costs 25,000 25,000 25,000 125,000 TOTALS VARIABLE COSTS PER UNIT Manufacturing 500 P 450 P 450 P 450 P 450 Distribution 100 100 100 100 100 Customer Service 50 50 50 50 50 600 TOTALS 650 P 600 P 600 P 600 P UNITS TO BE SOLD AND PRODUCED 300 800 850 900 400 3,250
Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed price on- demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell each rack so that it can have a product profit margin of 28%? FIXED COSTS Research and Design Manufacturing Distribution Year 1 Year 2 Year 3 Year 4 Year 5 ТOTALS P 200,000 P 50,000 30,000 P 230,000 50,000 50,000 20,000 30,000 50,000 50,000 250,000 20,000 80,000 20,000 20,000 20,000 100,000 20,000 25,000 Customer Service 30,000 25,000 P 375,000 P 175,000 P 125,000 P 125,000 P 115,000 P 915,000 50,000 210,000 Other incremental operating costs 25,000 25,000 25,000 125,000 TOTALS VARIABLE COSTS PER UNIT Manufacturing 500 P 450 P 450 P 450 P 450 Distribution 100 100 100 100 100 Customer Service 50 50 50 50 50 600 TOTALS 650 P 600 P 600 P 600 P UNITS TO BE SOLD AND PRODUCED 300 800 850 900 400 3,250
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed price on demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell each rack so that it can have a product profit margin of 28%?
Transcribed Image Text:Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be
producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed price on-
demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell
each rack so that it can have a product profit margin of 28%?
FIXED COSTS
Research and Design
Manufacturing
Distribution
Year 1
Year 2
Year 3
Year 4
Year 5
ТOTALS
P 200,000 P
50,000
30,000 P
230,000
50,000
50,000
20,000
30,000
50,000
50,000
250,000
20,000
80,000
20,000
20,000
20,000
100,000
20,000
25,000
Customer Service
30,000
25,000
P 375,000 P 175,000 P 125,000 P 125,000 P 115,000 P 915,000
50,000
210,000
Other incremental operating costs
25,000
25,000
25,000
125,000
TOTALS
VARIABLE COSTS PER UNIT
Manufacturing
500 P
450 P
450 P
450 P
450
Distribution
100
100
100
100
100
Customer Service
50
50
50
50
50
600
TOTALS
650 P
600 P
600 P
600 P
UNITS TO BE SOLD AND PRODUCED
300
800
850
900
400
3,250
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