Question

(This is what shows up in my homework, the previous numbers aren't related to questions 3-8)

For Q3 to Q8, the unit variable cost to make Umbra 520 is $125, and the fixed cost is $6,000,000.

(3) What is the unit cost if Macrohard gets an order from Pineapple Inc. for 60,000 units?

(4) What is the unit cost if Macrohard instead gets an order from BlueBerry Inc. for 120,000 units?

(5) Melissa Doors, CEO of Macrohard, wanted to announce the use of cost-plus pricing in a press conference, so she asked her assistant to calculate what the % markup would be if Macrohard made exactly enough phones to fulfill orders from BlueBerry and then sold them at $200. Mr. Assistant moonlights as a student in the MKTG 3500 class, so he knew how to calculate the answer. What is the number that he came up with and how?

(6) Now, the CEO asked her assistant to calculate what the % markup would be if Macrohard made exactly enough phones to fulfill both orders together (orders from both Pineapple and BlueBerry) and then sold them at $200. What is the number that he came up with and how? Page 3 out of 4

(7) Impressed by Mr. Assistant, Melissa Doors now asks him to calculate the BEV at a price of $225. Mr. Assistant is initially stumped, but then refers to his class notes and promptly calculates the answer by using unit margin. Show how he would calculate the BEV by using unit margin. Will Macrohard break even if it gets only the Pineapple order?

(8) Melissa Doors now insists on a target profit of $10,000,000 at a price of $250. Show how Mr. Assistant would calculate the required sales volume by using unit margin. Will Macrohard succeed at achieving the target profit if it gets only the BlueBerry order?

Answer 1

(3)

Total Variable costs = 60,000 X 125 =7,500,000

Total costs = 7,500,000 + 6,000,000 = 13,500,000

Per unit cost = 13,500,000 / 60,000 = $ 225 per unit

(4)

Total Variable costs = 120,000 X 125 = 15,000,000

Total costs = 15,000,000 + 6,000,000 = 21,000,000

Per unit cost = 21,000,000 / 120,000 = $ 175 per unit

(5)

Markup would be = (200 - 175) / 175 = 25 / 175 = 14.2857%

(6)

First we need to calculate per unit cost

Total variable costs = 180,000 X 125 = 22,500,000

Total costs = 22,500,000 + 6,000,000 = 28,500,000

Per unit cost = 28,500,000 / 180,000 = 158.33 per unit

Markup = (200 - 158.33) / 158.33 = 26.32%

(7)

Break even = 6,000,000 / (225 - 125) = 60,000 units.

Yes it will breakeven

(8)

Target units = (10,000,000 + 6,000,000) / 125 = 128,000 units

No, It won't