Question

Please use banner ID: 01716042 Please breakdown in details -Sun Microsystems, is a manufacturer of mid-size computers, which are primarily used by medium and small businesses. Sun Microsystems’s product line currently consists of three models of mid-size computers. The following data are available regarding the models: Model Selling Price per Unit Variable Cost per Unit Demand/Year (units) Model SMX1 $1,800 $1,000 2,500 Monster Inc. markets personal computer games through a variety of retail outlets. Presently, Monster is faced with a decision as to whether it should obtain the distribution rights to a new technology for personal computer gamers The new game consists of the Daytona 500 game CD, driver seat pad, and control unit with cable (one of each is required per computer to play the game). The retailer’s margin will be 30%. Other data available are as follows: Hot Stuff Daytona 500 Software License (per year).......................................$350,000 Annual interest payments................................................................................ $100,000 Annual Overhead (per year) .............................................................................. $50,000 Annual Advertising and promotion...........................................................................$60 Royalties for “Daytona 500” Game (per CD)............................................................ $10 Control Unit and Cable (per unit)................................................................................ $5 Material & Labor for Seat Pad (per pad).......................... First 3 digits of your Banner ID The suggested retail price is the last three numbers in your Banner ID number. If value of last three numbers is less than 100, multiple the last three digits of your ID by 10. The Material and Labor cost are the first 3 numbers in your Banner ID (ignoring the “@” symbol). For example, your Banner ID # is: @01565426, then the retail price is last 3 digits or $426 and Material cost is first 3 digits or $15. @01750043, then last 3 digits are 043, which is less than 100, so multiple by 10 to get retail price. Retail price is $430 and Material cost is first 3 digits or $17 Answer the following questions: 1) What is your Banner ID? 2) What is the price at which Monster must sell to the retailers? 3) What is VCI’s unit contribution? 4) What is the break-even point in units?

Answer 1

1.) Banner ID is 01716042

2.) Monster must sell at $ 323* to the retailers.

Workings:

Retail Price as per Banner ID (042*10) = $ 420 per unit

Retailer's Margin is 30%

Monster's Selling Price = $ 420 - = $ 420 - $ 420*130/30 = $ 420 - $ 97 (approx.) = $ 323

3.) VCI's Unit Contribution is $ 291

Workings:

Unit Contribution = Sale Price - Variable Cost

= $ 323 - $ 32

= $ 291

Variable Cost:

Royalty $ 10

Control unit & cable $ 5

Material & labor for seat pad $ 17

$ 32

4.) Break even point in units is 1719 units.

Workings:

Breakeven Point = Fixed Costs / Selling Price Per Unit - Variable Cost Per Unit

= $ 500060 / $ 323 - $ 32

= $ 500060 / $ 291

= 1719 units

Fixed Costs:

Annual Software license $ 350000

Annual Interest $ 100000

Annual Overhead $ 50000

Annual Advertising & Promotions $ 60

    $ 500060