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In: Accounting

Complete the attached worksheet. You will need to show your work for each question 1) CircumSpect...

Complete the attached worksheet. You will need to show your work for each question

1) CircumSpect Products produces a home sentry system, easily installed by a homeowner, that they can produce and ship at a cost of $214 per unit. The company has fixed costs of $11,000 per month. The company believes it can position the product as an upscale specialty item and retail it for $995, or it can use a broader market strategy and sell it for $495. Calculate the required breakeven level of sales, to include $4,000 per month in profit, at each of these prices. Next, discuss their profit levels at each price, assuming they sell twice as many units as they need to in order to breakeven.

2) Serenity Senior Retirement Home has a capacity of 100 residents. It estimates that it has a variable cost of $450/month per resident (to include room, board, and personalized attention), and fixed costs of $5,700 per month. Assuming they operate at a 92% occupancy rate, what price per resident per month must they charge in order to earn a monthly profit of $8,000?

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Expert Solution

Particulars Retailing as Upscale Broder Market Strategy
Sales Price 995.00 495.00
Less: VariableCost 214.00 214.00
Conribution Margin 781.00 281.00
Fixed Expense 11000 11000
Conribution Margin 781 281
Break even Point 1 15.00 40.00
(Fixed Exp/CM)
Fixed Expense+Profit 4000 15000 15000
Conribution Margin 781 281
Break even Point 20.00 54.00
(Fixed Exp/CM)
Twice the Units of BEP1
Particulars Retailing as Upscale Broder Market Strategy
Sales Price 29,850 39,600
Less: VariableCost 6,420 17,120
Conribution Margin 23,430 22,480
Fixed Expense 11,000 11,000
Net Operating Income 12,430 11,480
Net Income is higher in case of retailing as Upscale
2 Capacity of Residents 100
Occupancy Rate 92%
Occupancy Residents 92
Calculation of Price Per Resident:
Costs: PU Total
Variable Cost: 450 41400 (450*92)
Fixed Cost 5700
Total Costs 47100
Add: Monthly Profit to be Earned 8000
Total Desired Revenue 55100
Occupancy Residents 92
Price Per Resident 598.91

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