Question

The sales forecast is based on projected levels of demand. All the numbers are expressed in today’s dollars.

Price per bus $220,000

Units sold per year 12,250

Labor cost per bus $32,500

Components & Parts $86,500

Selling General & Administrative $200,000,000

The average warranty cost per year per bus for the first five years is $2,000. The present value of this cost will be used as a cost figure for each bus. Afterwards, the bus operator will become responsible the repairs on the buses. The buses can be produced for 15 years. Afterwards, the designs become obsolete.

Answer 1

As per given case

Price per bus $220,000

Units sold per year 12,250

Labor cost per bus $32,500

Components & Parts $86,500

Selling General & Administrative $200,000,000

Lets calculate sales Forcast for each Bus basis

Selling Price per Bus = $ 220,000

Cost of production

              Labor Cost per Bus $ 32500

          + Component & parts $ 86500

       + Seelling General Admin $16326.53 (Derived from $200,000,000/No. of Unit 12250)

      + Average warranty cost $ 2000 x 5 Years =$ 10000

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Total Cost of Production = $ 1,45,326.50

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Total Profit per Bus = $ 74673.47

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Total Profit with sale = $ 74673.47 x 12250 = $9,14,750,008

Total Sales = $2,695,000,000