Adorable Face is considering a new line of lipstick products. They would like to know if it will pay off. Estimated fixed costs are $250,000, and the manufacturing, materials, shipping and packaging cost (variable cost) per lipstick is $1.00. If they sell 80,000 lipsticks, what price should they charge (maintaining the $100,000 target profit and $200,000 advertising budget)?

Adorable Face is considering a new line of lipstick products. They would like to know if it will pay off. Estimated fixed costs are $250,000, and the manufacturing, materials, shipping and packaging cost (variable cost) per lipstick is $1.00. If they sell 80,000 lipsticks, what price should they charge (maintaining the $100,000 target profit and $200,000 advertising budget)?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11E

See similar textbooks

Similar questions

Night Shades Inc. (NSI) manufactures biotech sunglasses. These sunglasses sell for $150 each, and cost $70 each to produce. Night Shades Inc. has fixed costs of $100,000. Calculate Night Shades’ Breakeven point. how much profit (loss) will Night Shades have if it sells 500 sunglasses? 4,000 sunglasses? Night Shades’ manager expects an operating profit of $200,000. How many sunglasses must be sold to attain this profit?
Knarly Knife Kompany is thinking about launching a new kitchen knife set. Relevant fixed costs for this launch would be $1.3 million. The knife sets would sell for $55 each, earning a contribution margin of $22.93 per set. Suppose Knarly introduces the new knife set and sells exactly 45,600 knife sets. What would be Knarly's profit or loss on the launch, in dollars? (If it is a loss, be sure to include a negative sign. Rounding: whole dollar.) Answer is: -254,392, but HOW is that the answer? Please explain.
Ashley’s company is looking to add two new printers that will increase fixed costs by $75,000. The variable costs are $50 per order. The two new printers allow the business to increase their orders by 5000 annually. How many orders would have to be added to justify buying these new printers, vs not making any changes and continuing as they are? What other considerations might you consider in whether or not to make this purchase or not?
Success Electronics LLC is planning to introduce a low cost smart phone with attractive features. The market research information suggests that the product should sell 2000 units at RO 30 per unit. The company seeks to make a mark-up of 20% product cost. It is estimated that the lifetime costs of the product will be as follows: Design and development costs RO 5000 Manufacturing costs RO 22 per unit End of life costs RO 7000 What is the desired profit per unit? a. RO 6 per unit b. RO 10 per unit c. RO 5 per unit d. RO 15 per unit
Success Electronics LLC is planning to introduce a low cost smart phone with attractive features. The market research information suggests that the product should sell 2000 units at RO 30 per unit. The company seeks to make a mark-up of 20% product cost. It is estimated that the lifetime costs of the product will be as follows: Design and development costs RO 5000 Manufacturing costs RO 22 per unit End of life costs RO 7000 What is target cost per unit to achieve the desired profit? a. RO 24 per unit b. RO 25 per unit c. RO 22 per unit d. RO 20 per unit
A recently retired professor, Melinda Marketing, plans to establish the Hot-Air FanCompany and manufacture circulating fans. She estimates the fixed cost of operations tobe $357,500 annually. The variable cost of producing the fans is forecasted to be $85 perunit.a. How many fans must be sold to break even if the fans are priced at $150?b. If Hot-Air sells 6,000 fans, what will be the EBIT?c. If Hot-Air sells 6,000 fans and has interest expense of $8,125, what is Hot-Air’stimes-interest-earned? Hot-Air does not have any nonoperating expenses.d. If the fans are priced at $150, what is Hot-Air’s breakeven sales?
Pumped Up Kicks is a shoe manufacturing company that produces primarily athletic shoes. The company is considering introducing a new athletic shoe. The company has the capacity to produce up to 30,000 pairs of the new shoe per year. Company management is deciding between two possible new shoes. The “Foster” would be a court shoe and would have the following cost structure: Selling price per pair $140 Total variable costs per pair $80 Fixed production costs $150,000 The second possible new shoe would be called the “Ground Force 1” and would be a cross-training shoe. The Ground Force 1 would have the following cost structure: Selling price per pair $125 Total variable costs per pair $75 Fixed production costs $100,000 Producing either type of shoe will result in an additional $100,000 of fixed administrative costs. Assume Pumped Up Kicks total statutory tax rate of 20 percent. Questions: Determine the number of pairs of Fosters or…
Syntech makes digital cameras for drones. Their basic digital camera uses $80 in variable costs and requires $1,500 per month in fixed costs. Syntech sells 100 cameras per month. If they process the camera further to enhance its functionality, it will require an additional $50 per unit of variable costs, plus an increase in fixed costs of $1,000 per month. The current price of the camera is $170. The marketing manager is positive that they can sell more and charge a higher price for the improved version. At what price level would the upgraded camera begin to improve operational earnings? Price to be charged $ 277.37 X
Meyerson’s Bakery is considering the addition of a new line of pies to its product offerings. However, the following scenarios could be faced by this Bakery for the new line: First scenario: It is expected that each pie will sell for $17 and the variable costs per pie will be $11. Total fixed operating costs are expected to be $25,000. Meyerson’s faces a marginal tax rate of 25%, will have interest expense associated with this line of $3,500, and expects to sell about 4,500 pies in the first year. Second scenario: It is expected that each pie will sell for $15 and the variable costs per pie will be $9. Total fixed operating costs are expected to be $20,000. Meyerson’s faces a marginal tax rate of 35%, will have interest expense associated with this line of $3,000, and expects to sell about 4,000 pies in the first year. 1. Under the first scenario, How many pies would Meyerson’s need to sell in order to achieve EBIT of $20,000? (EBIT = Earnings Before Interest and Taxes).…
InteliSystems needs 79,000 optical switches next year . By outsourcing them, InteliSystems can use its idle facilities to manufacture another product that will contribute $140,000 to operating income, but none of the fixed costs will be avoidable. Should InteliSystems make or buy the switches? Show your analysis based on the information in the table below for making 70,000 switches.
Success Electronics LLC is planning to introduce a low cost smart phone with attractive features. The market research information suggests that the product should sell 2000 units at RO 30 per unit. The company seeks to make a mark-up of 20% product cost. It is estimated that the lifetime costs of the product will be as follows: Design and development costs RO 5000 Manufacturing costs RO 22 per unit End of life costs RO 7000 What is the original lifecycle cost per unit and is the product worth making on that basis? a. RO 23 per unit; The product is worth making b. RO 28 per unit; The product is not worth making c. RO 24 per unit; The product is worth making d. RO 29 per unit; The product is not worth making
Eastman Publishing Company is considering publishing an electronic textbook about spreadsheet applications for business. The fixed cost of manuscript preparation, textbook design, and website construction is estimated to be $160,000. Variable processing costs are estimated to be $6.00 per book. The publisher plans to sell single-user access to the book for $46. a. Build a spreadsheet model to calculate the profit/loss for a given demand. For example, what profit can be anticipated with a demand of 3500 copies? b. Use a data table to very demand from 1000 to 6000 in increments of 200 to assess the sensitivity of profit to demand. c. Use Goal Seek to determine the access price per copy that the publisher must charge to break even with the demand of 3500 copies. Before you move on to Problem 2, make sure you save your workbook with this value displayed or else you will not receive credit.