Question

Instructions

• Answer the following questions on a “working” spreadsheet where calculational cells contain cell-based formulas, not simply numbers. No credit will be given if your spreadsheet does not meet the assignment criteria.
• Submit your spreadsheet using the link in the “Assignments” folder on Blackboard by class time the day it’s due. No credit will be given for late assignments.
• Remember that the work you submit must be your own. Answers identical or suspiciously similar to those of your classmates’ constitute cheating and will not be tolerated.
• This assignment will be submitted electronically; no paper submissions, please!

Questions

1. A manufacturer of golf equipment has developed a new golf club named the Big Bomber. The fixed cost of the Bomber is $3.5 million and the variable cost per club is $125.
   1. If the manufacturer makes 325,000 clubs, what is the unit cost per club?
   2. What is it at the 425,000 production level?

2. Grill-Eze makes barbecue grills, selling them through wholesalers to retailers. Grill-Eze’s most popular model costs $250 at the retail level. If the retailer margin is 25%, and the wholesaler margin is 15%:
   1. How much should the retailer pay for this model of the grill?
   2. How much should Grill-Eze charge the wholesaler for the grill?

3. A fine jewelry store purchases a diamond necklace for $2200. A consumer in the store sees the necklace priced at $2750. What is the store's:
   1. Dollar markup on the necklace?
   2. Markup percentage on the cost of the necklace?
   3. Markup percentage on the price of the necklace?

4. A produce wholesaler uses a standard markup of 30% off the selling price for the fresh vegetables it sells to grocery stores.
   1. If the wholesaler buys carrots from the farmer at $.50 per pound, how much should the wholesaler charge Stop and Shop for the carrots?
   2. At a margin of 5%, how much should Stop and Shop charge its shoppers?

5. Quality Quilts makes handmade quilts and sells them to local gift and specialty shops. The average cost of the materials for each quilt is $45, and it takes its seamstresses an average of 8 hours to complete a quilt at an hourly wage of $20/hour. Quality pays $2000 in rent, $250 in insurance, $150 in utilities, and $3000 in administrative salaries. It sells the quilts for $250.
   1. What is the dollar contribution margin per quilt?
   2. What is the contribution margin percent?
   3. How many quilts does Quality need to sell each month to breakeven?
   4. What is the dollar breakeven amount?
   5. How would you check your work, using another method to calculate the dollar breakeven amount?

6. EcoFlame Candles, a small manufacturer of organic, sustainably sourced and produced candles, is weighing some promotional options for the month of March. The candles cost $3 each to manufacture and overhead is $12,000 per month. The candles are sold to EcoFlame’s distributor for $4.25 each.
   1. What is the March breakeven amount for the candle line itself?
   2. One promotional option is to advertise in Candle Monthly, a publication aimed at the candle industry. The advertising costs for March would be $850. What is EcoFlame’s new March breakeven amount?
   3. A second option would be a promotional discount to wholesalers of two and a half percent off the price of each candle purchased during March. What would EcoGreen’s breakeven amount for March be under this scenario?
   4. Assuming that EcoFlame expects the same sales increase from each option, which one should it select and why?

Answer 1