If the store refuses to pay more than 800 per unit but is

Reference no: EM13590068

Molly Jasper and her sister, Caitlin Peters, got into the novelties business almost by accident. Molly, a talented sculptor, often made little figurines as gifts for friends. Occasionally, she and Caitlin would set up a booth at a crafts fair and sell a few of the figurines along with jewelry that Caitlin made. Little by little, demand for the figurines, now called Mollycaits, grew, and the sisters began to reproduce some of the favorites in resin, using molds of the originals. The day came when a buyer for a major department store offered them a contract to produce 1,500 figurines of various designs for $10,000. Molly and Caitlin realized that it was time to get down to business. To make bookkeeping simpler, Molly had priced all of the figurines at $8.00. Variable operating costs amounted to an average of $6.00 per unit. To produce the order, Molly and Caitlin would have to rent industrial facilities for a month, which would cost them $4,000.

a. Calculate Mollycaits' operating breakeven point.

b. Calculate Mollycaits' EBIT on the department store order.

c. If Molly renegotiates the contract at a price of $10.00 per figurine, what will the EBIT be?

d. If the store refuses to pay more than $8.00 per unit but is willing to negotiate quantity, what quantity of figurines will result in an EBIT of $4,000?

e. At this time, Mollycaits come in 15 different varieties. Whereas the average variable cost per unit is $6.00, the actual cost varies from unit to unit. What recommendation would you have for Molly and Caitlin with regard to pricing and/or the numbers and types of units that they offer for sale?

Reference no: EM13590068

Questions Cloud

Ocallahan sank company produces gourmet chips and other : ocallahan sank company produces gourmet chips and other snack foods. one of the companys most popular snacks is a

Assume coupons are paid annually here are the prices of : assume coupons are paid annually. here are the prices of three bonds with 10-year maturities bond coupon price 2

On january 1 of the current year feller corporation : on january 1 of the current year feller corporation issued 3000000 of 10 debenture bonds on a basis to yield 8

On march 31 2209 hanson corporation sold 7000000 of its 8 : on march 31 2209 hanson corporation sold 7000000 of its 8 10 year bonds for 6730500 including accrued interest. the

If the store refuses to pay more than 800 per unit but is : molly jasper and her sister caitlin peters got into the novelties business almost by accident. molly a talented

Te two balls swing apart until each makes an angle of 21 : two styrofoam balls each with a mass of 335 mg and carrying the same electric charge are suspended from a common point

Jones company owns 100 of bruce inc and appropriately : jones company owns 100 of bruce inc. and appropriately applies the equity method. during the current year jones sold

Flexibility timeless and forward looking are said to be the : flexibility timeless and forward looking are said to be the prominent traits of modern management accounting whereas

Richard retires receiving 60000 cash from the partnership : johann josef and richard are partners in the strauss partnership with the following capital and profit and lossjohann

User Account

All Pages