# Module questions by HC120807112717

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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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