Question

ThatcherThatcher

Paints makes and sells paint to home improvement stores.

ThatcherThatcher​'s

only plant can produce up to

99

million cans of paint per year. Current annual production is

66

million cans. Fixed​ manufacturing, selling, and administrative costs total

$ 10.2$10.2

million per year. The variable cost of making and selling each can of paint is

$ 6.40$6.40.

Stockholders expect a

2525​%

annual return on the​ company's

$ 35$35

million of assets.

Requirement 1. What is

ThatcherThatcher​'s

current total cost of making and selling

66

million cans of​ paint? What is the current cost per can of​ paint? Select the formula labels and enter the amounts to calculate

ThatcherThatcher​'s

current total cost and current cost per can of paint. ​(Enter currency amounts in​ dollars, not in millions. Enter unit values as whole​ numbers, not in millions. Round all currency amounts to the nearest whole dollar and round the cost per unit to the nearest​ cent, $X.XX.)

Plus:
Divided by:	Number of units
Total cost per unit		Requirement 2. Assume that

ThatcherThatcher

is a​ price-taker and the current wholesale market price is

$ 6.90$6.90

per can of paint. What is the target total of cost in producing and selling

66

million cans of​ paint? Given

ThatcherThatcher​'s

current total​ costs, will the company reach​ stockholders' profit​ goals?Begin by calculating

ThatcherThatcher​'s

target total cost. Select the formula labels and enter the amounts. ​(Enter currency amounts in​ dollars, not in millions. Round all currency amounts to the nearest whole​ dollar.)

Less:
Target total cost

Given

ThatcherThatcher​'s

current total​ costs, will the company reach​ stockholders' profit​ goals? ​(Enter currency amounts in​ dollars, not in​ millions.)

, the company

reach stockholders' profit goals. There will be a(an) $

.

Requirement 3. Continuing with Requirement​ 2, let's say that

ThatcherThatcher

has found ways to reduce its total fixed costs by

$ 270 comma 000$270,000.

What is the target variable cost per can of​ paint?Select the formula labels and enter the amounts to calculate

ThatcherThatcher​'s

target variable cost per can of paint. ​(Enter currency amounts in​ dollars, not in millions. Enter unit values as whole​ numbers, not in millions. Round cost per unit amounts to the nearest​ cent, $X.XX.)

Less:
Divided by:

Requirement 4. Suppose

ThatcherThatcher

plans to spend an additional

$ 1.9$1.9

million on advertising to differentiate its product in order to increase sales volume to

77

million cans and become more of a​ price-setter. Assume that

ThatcherThatcher

did reduce its total fixed costs by

$ 270 comma 000$270,000

as stated in Requirement 3 but could not find ways to save on its variable costs. What is the​ cost-plus price for a can of paint under these​ conditions?Select the formula labels and enter the amounts to calculate

ThatcherThatcher​'s

​cost-plus price for a can of paint under these conditions. ​(Enter currency amounts in​ dollars, not in millions. Round cost per unit amounts to the nearest​cent, $X.XX.)

Current total costs
Plus:
Divided by:
Cost-plus price per unit

Answer 1

Req 1: Number of Units to be sold: in Million
Variable cost (66 million cans @$ 6.40)	$422.40
Add: fixed cost	$10.20
Total cost	$432.60
Divide: Number of Units	$66.00
Total cost per unit	$6.55
Req 2: Total target Cost: ( in Million)
Sales revenue (66000,000 units @$ 6.90)	$455.40
Less: target Profits @25%	$113.85
Target total cost	$341.55
Yes, the company current total cost reach the stockholder's profit goals.
There will be an ( 433-342) i.e. $91 additional profit.
Req 3: ( in Million)
Total target cost:	$342.00
Less: fixed cost (10.2 Million-0.27 Million)	$9.93
Target total variable cost	$332.07
Divide: Number of units	66
Target variable cost per unit	$5.03
Req 4: ( in Million)
Variable cost (66 Million units @6.40)	$422.00
Add: Fixed cost (10.20 Million+1.9-0.27 Million)	$11.83
Total Current cost	$433.83
Add; target profits	$108.46
($433.83*25%)
Total Sales required	$542.29
Divide: Number of units	66 Mllion
Cost plus price per units	$8.22