Question

Please use excel and show formulas

Diamond Machine Technology makes a tool for sharpening the blades of pruning sheers and glass clippers. The company has invested $250,000 in developing this sharpener. This tool, which is about the size of a piece of chewing gum, costs $3 to make. Fixed costs for the sharpener is $10,000. The company expects to sell 100,000 sharpeners this year. Diamond Machine's markup on sales is 30 percent, and it wants to earn a 20 percent ROI. Calculate both its markup price and its target-return price as well as its break-even volume at both prices. Which price should Diamond Manufacturing use and why?

Mark up price A.

Target Return Price B.

Break Even Volume Mark up price C.

Break Even Volume Target Return Price D.

Answer 1

Mark up Price
Particulars	Amount
Variable Cost=100000*3	300000
Fixed Cost	10000
Total Cost	310000
No of units sold	100000
Cost P.U	3.1
Add Markup=3.1*30/70	1.33
Selling Price	4.43

Target return Price
Particulars	Amount
Variable Cost=100000*3	300000
Fixed Cost	10000
Return on investment=250000*20%	50000
Total	360000
No of units sold	100000
Selling P.U	3.6

Breakeven Quantity at Markup price
Fixed Cost	10000
Contribution P.U	1.43
	6993.007
Preferred since BEP is Lower
Breakeven Quantity at Markup price
Fixed Cost	10000
Contribution P.U	0.6
	16666.67