Module questions by HC120807112717

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									                                     Bank 1: Level 2
                                       Solutions
A)

i. A major publishing firm prints and sells statistics textbooks. The selling price of the book is $100
           and the cost to print each book is $50. The firm can make a profit of $10,000 by selling
           400 books. How many books does this firm need to sell to break-even?

           Variables:
               A Selling price: range from $80 to $120
               B Cost to print each book: range from $20 to $60
               C Profit: range from $2000 to $11,000
               D From comes from selling how many books: range 300 to 500.

           Step 1: figuring out fixed costs:
           Required sales          =     Fixed Costs+ profit goal
                                   Unit Selling Price – Unit Variable

           400     =              X+ $10,000         fixed cost = $10,000
                                  $100 – $50

           Step 2: Break even
           Required sales         =     Fixed Costs+ profit goal
                                  Unit Selling Price – Unit Variable

           x       =              $10,000                 =       200 books
                                  $100 – $50

ii.        A Key Electronics makes and sells customer lap top computers. The firm can make a
           profit of $100,000 by selling 400 lap tops. The selling price is $1000 and the cost to make
           each lap top and ship it is $500. How many lap tops does this firm need to sell to break-
           even?

           Variables:
               A Selling price: range from $800 to $1200
               B Cost to make each lap top: range from $200 to $500
               C Profit: range from $20,000 to $120,000
               D From comes from selling how many lap tops: range 300 to 500.


           Step 1: figuring out fixed costs:
           Required sales          =     Fixed Costs+ profit goal


                                                         1
                                    Unit Selling Price – Unit Variable

             400    =              X+ $100,000       fixed cost = $100,000
                                   $1000 – $500

             Step 2: Break even
             Required sales        =     Fixed Costs+ profit goal
                                   Unit Selling Price – Unit Variable

             x      =              $100,000               =       200 lap tops
                                   $1000 – $500

B)
 i. A publishing firm prints and sells a new marketing textbook. The selling price is $100 and the cost
             to print each book is $50. The firm can break even by selling 400 books. By selling how
             many books must this firm sell to make $10,000 profit?

             Variables:
                 A Selling price: range from $80 to $120
                 B Cost to make each engine: range from $20 to $60
                 C Breakeven number: range 300 to 500.
                 D Profit: range $5000 to $10,000


             Step 1: figuring out fixed costs:
             Required sales          =     Fixed Costs+ profit goal
                                     Unit Selling Price – Unit Variable

             400    =              X               fixed cost = $20,000
                                   $100 – $50

             Step 2: Profit
             Required sales        =     Fixed Costs+ profit goal
                                   Unit Selling Price – Unit Variable

             x      =              $20,000         + $10,000      =       600 books
                                    $100 – $50

             ii. A Key Electronics makes and sells customized palm pilots. The selling price is $100
             and the cost to make each palm pilot is $50. The firm can break even by selling 400 palm
             pilots. By selling how many palm pilots must this firm sell to make $10,000 profit?




             Variables:
                 A
                 B
                 C                                        2
                 D
             Selling price: range from $80 to $120
             Cost to make each engine: range from $20 to $60
             Breakeven number: range 300 to 500.
             Profit: range $5000 to $10,000


     Step 1: figuring out fixed costs:
     Required sales          =     Fixed Costs+ profit goal
                             Unit Selling Price – Unit Variable

     400     =             X               fixed cost = $20,000
                           $100 – $50

     Step 2: Profit
     Required sales        =     Fixed Costs+ profit goal
                           Unit Selling Price – Unit Variable

     x       =             $20,000 + $10,000      =       600 palm pilots
                            $100 – $50


C)
i.   IBM is trying to decide whether or not outsource the production of monitors. If they
     outsource the monitors, their fixed costs will be $100,000 per month and each monitor
     will cost them $100. If they make the monitors in-house their fixed costs will be
     $400,000 and the cost to make the monitors will be $20 per monitor. The price that they
     sell the monitors to retail stores is $200. Their demand is a constant 5000 monitors per
     month. How much profit would outsourcing the production of monitors have compared
     to in-house production? (Can be a negative or positive value)



     Variables:
         Outsource fixed costs: Range $50,000 to $200,000
         A
         B
         Outsource cost per unit: Range $50 to $120
         Inhouse fixed costs: Range $350,000 to $1,000,000
         C
         Inhouse cost per unit: $10 to $25
         D
         Retail store sales: $200 to $500
         E
        F Demand 1000 to 20,000

     Step 1 calculating profit from outsourcing and in-house options
     Outsource:
     Profits = $1,000,000- $600,000= $400,000; Revenue = $200 * 5000 = $1,000,000; Total
            Cost= $500,000 +$100,000= $600,000; Var costs = $100*5000 = $500,000

     In-house:


                                                  3
       Profits = $1,000,000- $500,000= $500,000; Revenue = $200 * 5000 = $1,000,000; Total
              Cost= $100,000 +$400,000= $500,000; Var costs = $20*5000 = $100,000

        Step 2: Subtracting in-house profit from outsourcing

        Outsourcing profit- inhouse profit = $400,000-$500,000= -$100,000

     ii. Casio is trying to decide whether or not outsource the production of Casio watches. If
         they make the watches in-house their fixed costs will be $180,000 and the cost to make
         the watches will be $.90 per watch. If they outsource the watches, their fixed costs will
         be $10,000 per month and each watch will cost them $4.50. The price that they sell the
         watches to retail stores is $5.00. Their demand is a constant 50,000 watches per month.
         How much profit would outsourcing the production of watches have compared to in-
         house production? (Can be a negative or positive value)

       Variables:
           Outsource fixed costs: Range $5000 to $20,000
           A
           Outsource cost per unit: Range $2 to $4.5
           B
           Inhouse fixed costs: Range $350,000 to $1,000,000
           C
           Inhouse cost per unit: $.1 to $1
           D
           Retail store sales: $5 to $20
           E
          F Demand 10,000 to 200,000

        Step 1: Determine profits of both ways
         Profits = Revenue- Total costs; Revenue = Price * Quantity; Total Cost= Variable costs
                +fixed costs; Var costs = unit cost*quantity

         Outsource
         Rev= $5* 50,000= $250,000; Var costs= 4.5*50,000= $225,000; Fixed cost = $10,000;
              Total costs $225,000+$10,000= $235,000; Profit = 250,000-$235,000= $15,000

         Inhouse
         Rev= $5* 50,000= $250,000; Var costs= .9*50,000= $45,000; Fixed cost = $180,000;
               Total costs $45,000+$180,000= $225,000; Profit = 250,000-$225,000= $25,000

         Step 2: Figure out which is more profitable
         Profit outsource- Profit make internally = $15,000- $25,000= -$10,000.


D)

i. A manufacturer had a total contribution of $2,000 selling hand held video game. Their total
       revenue was $3,000 and they sold 50 units. Their fixed costs were $5000. What is the
       variable cost of each hand held video game?




                                                     4
       Variables
        A  Total contributions: range $1000 to $2500
        B  Total revenue: range $3000 to $5000
        C  Number of units sold: Range 40 to 500
        D  Fixed costs (not actually used in equation): range $1000 to $100,000

       Step 1: Total variable contribution
       Total contribution= total revenue –total variable cost

        $2,000= $3,000-X= $1,000 total variable costs

       Step 2: Variable cost of each unit
       Total variable costs =unit variable cost*units sold
       Total variable costs /units sold= unit variable cost
       Total variable costs= $1000/50 = $20 Variable cost per unit


       ii. A manufacturer had a total contribution of $1000 by selling desks. Their total revenue
       was $2,000 and they sold 50 units. What is the variable cost of each desk?

       Variables
        A  Total contributions: range $500 to $1500
        B  Total revenue: range $2000 to $5000
        C  Number of units sold: Range 40 to 500
        D  Fixed costs: = 0

       Step 1: Total variable contribution
       Total contribution= total revenue –total variable cost
       $1,000= $2,000-X= $1,000 total variable costs

       Step 2: Variable cost of each unit
       Total variable costs =unit variable cost*units sold
       Total variable costs /units sold= unit variable cost
       Total variable costs= $1000/50 = $20 Variable cost per unit



E)
i. A manufacturer had a total contribution of $2,000 selling hand held video game. Their unit
       contribution is $50. The selling price of each unit is $100. Their fixed costs were $5000.
       What is the total revenue?

       Variables
          A Total contributions: range $1000 to $2500
           B
           C
           D
                                                  5
              Selling price: range $30 to $500
              Unit contribution: Range $50 to $250
              Fixed costs (not actually used in equation): range $1000 to $100,000

       Step 1: Number of units sold
       Total contribution=unit contribution*units sold
       Total contribution= $2000= $50*X = 40
       Units sold= 40

       Step 2: Total revenue
       Total revenue= unit revenue*units sold
       $100*40 = $4000

ii. Key Electronics had a total contribution of $2,000 selling portable televisions. Their unit
        contribution is $50. The selling price of each unit is $100. Their fixed costs were $5000.
        What is the total revenue?

       Variables
          A Total contributions: range $1000 to $2500
          B Selling price: range $30 to $500
          C Unit contribution: Range $50 to $250
          D Fixed costs (not actually used in equation): range $1000 to $100,000

       Step 1: Number of units sold
       Total contribution=unit contribution*units sold
       Total contribution= $2000= $50*X = 40
       Units sold= 40

       Step 2: Total revenue
       Total revenue= unit revenue*units sold
       $100*40 = $4000




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