Fineprint Company (a)

Breakeven Analysis for Product Tylenol Approach 1 - Same price as Tylenol Approach 2a - Cheaper than Tylenol Approach 2b - Cheaper w/lowered trade cost $ $ $ $ Unit Cost (Variable Cost) 0.60 0.60 0.60 0.60 Trade Cost (Selling Price to Retailers) $ 1.69 $ 1.69 $ 1.05 $ 0.70 Fixed Cost (Advertising) 2,000,000 6,000,000 6,000,000 6,000,000 Break-Even Quantity [Fixed Cost/(Trade Cost-Unit Cost)] 1,834,862 5,504,587 13,333,333 60,000,000 Contribution Margin (Unit) 64% 64% 43% 14%

To reposition its water as a premium product, Healthy Spring will require an increase in its advertising and promotion budget of $900 daily. What is the maximum sales loss that Healthy Spring could tolerate before a 20% price increase would fail to increase its net profit? (That is, what is the breakeven sales change, including the incremental fixed cost of the advertising campaign?)

One of specialty’s managers felt that the profit potential was so great that the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock-outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios?

* Level of Production (Ton/year): Assumed the data provided in the case for a new pulp mill.

11. If 8,000 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? What is the total amount expressed on a per unit basis?

One of the major benefits of expansion is the reduction of fixed cost (fixed and selling). The cost is absorbed by 85,000 units instead of 80,000 units resulting in saving of $0.42 per unit.

Determine the unit break-even point, assuming fixed costs are $60,000 per period, variable costs are $16.00 per unit, and the sales price is $25.00 per unit.

In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.

Based on the Excel Problem of chapter one, if the total capacity for this business is 725 will you stay in it? If you want to stay in it what price you need to obtain a break even point of 725?

Break-even Dollar Volume = Total Fixed Costs / Contribution Margin = $525,000 / 0.7111 = $738,282.40

If Marlene Herbert were to discontinue place mats, he would miss $270,000 that will go toward Mendel paper company fixed cost. The company currently has a plant overhead that is estimated at $420,000 for the quarter. In addition to the fixed plant overhead, the plant incurs fixed selling and administrative expenses per quarter of $118,000. This draws the company to a total fixed cost of $538,000. If Marlene Herbert were to discontinue the second highest contributor to the fixed cost, he would need to increase the volume of computer paper and lower material cost to help pull the contribution margin of the lowest product up to help support the lost of a whole product line.

Peter’s Peripherals assembles multimedia upgrade kits --- sets of components for adding sound and video to desktop computers. The demand for their kits for the next four quarters is estimated in the table below. Unit manufacturing cost for each kit is $160. Holding costs on each kit is $80 per quarter. Any kit that must be delivered late is assessed a backorder cost of $120. Each worker is capable of finishing 10 kits per quarter. If the company chooses to vary work force levels, it will incur costs of $400 for each additional worker; $600 for each termination. The company currently has 28 employees.

WLI executives had two options of pricing. First option was to position Niconil in the same price range as cigarettes. In other words, the expected retail price per unit would be £32.00. On the other hand, second price option was to place Niconil in the premium price range. Under this second option, the expected retail price per unit would be £60.00. Breakeven analysis would be very helpful for examining these two options.

5. From the information we get above, I would recommend an order quantity that can maximize the expected profit, and it can be calculated by the formula below: P(Demand<=Q) = C1/(C1+C2).

When price is $20.6, the quantity is 1,242,425 and profit is $101, we come near to break even point.