Tiktok Company distributes a lightweight lawn chair that sell for P150 per unit. Variable costs are P60 per unit, and fixed costs total P1,800,000 annually. Assume that the company sold 28,000 units last year. The president feels that it would be unwise to change the selling price. Instead, he wants increase the sales commission by P20 per unit. He thinks that this move, combined with some increase in advertising, would cause annual sales to double. By how much could advertising be increased with profits remaining unchanged?
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Tiktok Company distributes a lightweight lawn chair that sell for P150 per unit. Variable costs are P60 per unit, and fixed costs total P1,800,000 annually. Assume that the company sold 28,000 units last year. The president feels that it would be unwise to change the selling price. Instead, he wants increase the sales commission by P20 per unit. He thinks that this move, combined with some increase in advertising, would cause annual sales to double. By how much could advertising be increased with profits remaining unchanged?
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- Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $55,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,000 more units per year. Currently, the selling price per unit is $25 and the cost per unit is $7.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.Variety Artisans has a bottleneck in their production that occurs within the engraving department. Arjun Naipul, the COO, is considering hiring an extra worker, whose salary will be $45,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,500 more units per year. Currently, the selling price per unit is $18 and the cost per unit is $5.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.Keleher Industries manufactures pet doors and sells them directly to the consumer via their web site. The marketing manager believes that if the company invests in new software, they will increase their sales by 10%. The new software will increase fixed costs by $400 per month. Prepare a forecasted contribution margin income statement for Keleher Industries reflecting the new software cost and associated increase in sales. The previous annual statement is as follows:
- Totally Tanked, Inc. sells tank tops. The firm is considering making some changes in order to achieve its goal of increasing its profit. If it makes no changes, the company anticipates the following for the coming year. Maria, one of the company’s managers suggests the following: “I think if we cut our price to $17 a tank top, we will increase our sales to 3,700,000 tank tops. I think that will help us achieve our goal” Question: If the company wants to have income from operations of $22,000,000 AND it does NOT implement Maria’s plan, how many tank tops does it need to sell? How much profit will the company make at its breakeven point? (show work) # of tank tops to be sold 3,000,000 Selling price per tank top $20 Variable expense per tank top $8 Fixed expenses for the year $20,000,000 Maria, one of the company’s managers suggests the following: “I think if we cut our…Totally Tanked, Inc. sells tank tops. The firm is considering making some changes in order to achieve its goal of increasing its profit.If it makes no changes, the company anticipates the following for the coming year. Maria, one of the company’s managers suggests the following: “I think if we cut our price to $17 a tank top, we will increase our sales to 3,700,000 tank tops. I think that will help us achieve our goal” Question: Mr. Big, the CEO, upon hearing Maria’s plan says “This is great! We should go forward with your plan since we will increase sales by 700,000 tank tops.” How would you answer Mr. Big? # of tank tops to be sold 3,000,000 Selling price per tank top $20 Variable expense per tank top $8 Fixed expenses for the year $20,000,000A moped company produces 200,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside producer. The manager believes that the chains can be made in house at an additional cost of $0.40 per chain. However, the manager believes that the quality of the product is slightly better and she’ll be able to add $1.0 to the selling price per unit without reducing the 200,000 units sold per year. The new machinery would cost $260,000 and the entire cost would be depreciated straight line over 10 years. The inhouse production would require $26,000 of inventory and other working capital upfront (year 0), which can be recovered at the end of the 10th year. The proceeds from selling the machine after 10 years would be $20,000. The company pays a tax rate of 20%. a. What are the incremental annual cash flows associated with changing the production of the chains from outsourcing to in-house? b. What is the IRR of the option to switch to an inhouse…
- APQ Company currently sells a piece of equipment for $150 per unit. It plans on lowering the price of the unit to $119 per unit. The cost of goods for each unit is consistent each year, at $52 per unit. The company expects to sell 100,000 units in the current year. Suppose that if APQ drops the price on the equipment immediately, it can increase sales over the next year by 30% to 130,000 units. Will this price decrease have a positive or negative impact on the company's EBIT? What will be the dollar value of the incremental impact of this price drop on the firm's EBIT? Will this have a positive or negative impact on the EBIT for the company? What will the dollar value of the incremental impact of the price drop be for the company? (Enter a negative for a loss, positive for a gain; round your answer to the nearest whole dollar.)Alpha Frontier Inc. introduced a product ten years ago. The product’s patent has now expired and Alpha expects a significant increase in suppliers for this product. Alpha originally sold the products at P 1,500 each but competitors will likely sell it at P1,450. Last year, Alpha had actual and budgeted cost per unit of P806.67 and P783.33 respectively. If Alpha wants to maintain the profit per unit earned last year, how much should the decrease in the budgeted cost per unit be for the coming year? Budgeted Last Year Actual Total Costs P 1,175,000 P 1,210,000 Units Sold 1,500.00 1,500.00 Cost per unit P 783.33 P 806.67Nytre Limited sells executive office chairs for a price of $195 each. The contribution margin ratio of the chairs is 60% and the company’s fixed costs for this year are expected to be $80,000. The company has a profit target this year of $85,000 and is considering an improved design which is expected to increase sales. Question 14: If the company decides to use the improved design, direct labour costs will increase by $10 per chair. How many chairs must the company now sell to reach its profit target, given the increased labour costs?
- Alpha Frontier Inc. introduced a product ten years ago. The product's patent has now expired and Alpha expects a significant increase in suppliers for this product. Alpha originally sold the products at P1,500 each but competitors will likely sell it at P1,450. Last year, Alpha had actual and budgeted cost per unit of P806.67 and P783.33 respectively. If Alpha wants to maintain the profit per unit earned last year, how much should the decrease in the budgeted cost per unit be for the coming year? Last Year Budgeted -Actual Total Costs P 1,175,000 P 1,210,000 Units Sold 1,500.00 1,500.00 Cost per unit 783.33 P 806.67Istanbul company makes special kind of product. Variable costs are $221 per unit, and fixed costs are $30,000 per month. Istanbul sells 500 units per month at a sales price of $310. If the quality of the product is upgraded, the company believes it can increase the sales price to $349. If so, the variable cost will increase to $230 per unit. And the fixed costs will rise by 50%. If Istanbul decides to upgrade, how will operating income be affected? Increase by $3,000 Will remain the same Increase by $4,500 Decrease by $4,500 Decrease by $15,000Hyperion, Inc. currently sells its latest high-speed color printer, the Hyper 500, for $350. It plans to lower the price to $300 next year. Its cost of goods sold for the Hyper 500 is $200 per unit, and thi year's sales are expected to be 20,000 units.a) Suppose that if Hyperion drops the price to $300 immediatley, it can increase this year's sales by 25% to 25,000 units. What would be the incremental impact on this eyar's EBIT of such a price drop?b) Suppose that for each printer sold, Hyperion expects additional sales of $75 per year on ink cartridges for the next years, and Hyperion has a gross profit margin of 70% on ink cartridges. What is the incremntal impact on EBIT for the next three years of a priced drop this year?