Question

In: Accounting

1a. In order to at least break-even, a price must cover total costs (COGS + fixed...

1a. In order to at least break-even, a price must cover total costs (COGS + fixed costs). Calculate total cost and per unit total cost for XYZ eyeglass manufacturer with the following information (show your calculations):

Total units produced and sold: 100,000

Total annual management compensation: $600,000

Annual utilities cost: $120,000

Annual office rent: $240,000

Annual advertising cost: $400,000

Annual shared admin department costs: $600,000

40,000 plastic frames purchased in January for $10 each

20,000 plastic frames purchased in March for $9 each

40,000 plastic frames purchased in August for $11 each

40,000 lenses purchased in January for $5 each

20,000 lenses purchased in March for $6 each

40,000 lenses purchased in August for $7 each

100,000 units of glue purchased in January for $1 per unit

100,000 units of screws purchased in January for $1 per unit

1b. XYZ eyeglasses company has decided to sell the glasses at a set price of $39.99 per pair. Calculate the quantity XYZ must sell to break-even. Then, calculate profit margin per unit assuming XYZ sells all 100,000 eyeglasses. (Show your calculations)

1c. What would be the impact to break-even and profitability for XYZ if it lowered the price by $5 to $34.99?

- What would be the new profit margin per unit? ·

- What would be the new required units sold to break-even? ·

- How much would the profit margin change?

Expert Solution

ekkarill92 answered 2 years ago

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