Calculate the break‐even point for Pearson & Litt for 2019 and 2020.
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Consider the info provided below as well as the financial statements and answer the questions that follow.
Pearson & Litt is a manufacturing company in the Eastern Cape. Their factory manufactures glass wine bottles for the Blue Valley Beer Co.
For 2019 and 2020 respectively :
Sales price per unit R15 and R19
Variable cost per unit R6 and R7
Fixed cost (FC) per annum R650 000 and R 855 500
Fixed cost per unit R3 and R4
Current assets R450 600 and R560 700
Current liabilities R510 000 and R780 000
Retained profit R21 809 and R17 600
Net Sales R2 900 320 and R 3 100 100
Cost of sales R390 000 and R475 000
Q.1 Calculate the break‐even point for Pearson & Litt for 2019 and 2020.
Q.2 Compare the results of the 2019 and 2020 break‐even point and explain why there might be a difference.
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- Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?The Tinkan Company produces one-pound cans for the Canadian salmon industry. Each year the salmon spawn during a 24-hour period and must be canned immediately. Tinkan has the following agreement with the salmon industry. The company can deliver as many cans as it chooses. Then the salmon are caught. For each can by which Tinkan falls short of the salmon industrys needs, the company pays the industry a 2 penalty. Cans cost Tinkan 1 to produce and are sold by Tinkan for 2 per can. If any cans are left over, they are returned to Tinkan and the company reimburses the industry 2 for each extra can. These extra cans are put in storage for next year. Each year a can is held in storage, a carrying cost equal to 20% of the cans production cost is incurred. It is well known that the number of salmon harvested during a year is strongly related to the number of salmon harvested the previous year. In fact, using past data, Tinkan estimates that the harvest size in year t, Ht (measured in the number of cans required), is related to the harvest size in the previous year, Ht1, by the equation Ht = Ht1et where et is normally distributed with mean 1.02 and standard deviation 0.10. Tinkan plans to use the following production strategy. For some value of x, it produces enough cans at the beginning of year t to bring its inventory up to x+Ht, where Ht is the predicted harvest size in year t. Then it delivers these cans to the salmon industry. For example, if it uses x = 100,000, the predicted harvest size is 500,000 cans, and 80,000 cans are already in inventory, then Tinkan produces and delivers 520,000 cans. Given that the harvest size for the previous year was 550,000 cans, use simulation to help Tinkan develop a production strategy that maximizes its expected profit over the next 20 years. Assume that the company begins year 1 with an initial inventory of 300,000 cans.Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.
- Leah Johnson, director of Urgent Care of Brookline, wants to increase capacity to provide low-cost flu shots but must decide whether to do so by hiring another full-time nurse or by using part-time nurses. The table below shows the expected costs of the two options for three possible demand levels: States of Nature (demand) Alternatives Low Medium High Hire full−time $320 $480 $700 Hire part−time $0 $340 $800 Probabilities 0.20 0.55 0.25 Part 2 a) The alternative with the least expected cost is ▼ a. Hire full-time b. Hire part-time The expected price of this alternative is $_______ (enter your answer as a whole number). Part 4 b) The appropriate decision tree for Leah Johnson is presented in Figure____?Hair Zone manufactures a brand of hair-styling gel. It is considering adding a modifiedversion of the product—a foam that provides stronger hold. Hair Zone’s variable costs and prices to wholesalers are: Current Hair Gel New Foam Product Unit selling price 2.00 2.25 Unit variable costs . 85 1.25Hair Zone expects to sell 1 million units of the new styling foam in the first year after introduction, but it expects that 60% of those sales will come from buyers who normally purchase Hair Zone’s styling gel. Hair Zone estimates that it would sell 1.5 million units of the gel if it did not introduce the foam. If the fixed cost of launching the new foam will be $100,000 during the first year, should Hair Zone add the newproduct to its line? Why or why not?Leah Johnson, director of Urgent Care of Brookline, wants to increase capacity to provide low-cost flu shots but must decide whether to do so by hiring another full-time nurse or by using part-time nurses. The table below shows the expected costs of the two options for three possible demand levels: States of Nature (demand) Alternatives Low Medium High Hire full−time $320 $480 $700 Hire part−time $0 $350 $1,200 Probabilities 0.15 0.45 0.40 Part 2 a) The alternative with the least expected cost is ▼ a. Hire part-time b. Hire full-time The expected price of this alternative is $_______ (enter your answer as a whole number). Part 4 b) The appropriate decision tree for Leah Johnson is presented in Figure____?
- Hair Zone manufactures a brand of hair-styling gel. It is considering adding a modified version of the product – a foam that provides stronger hold. Hair Zone’s variable costs and prices to wholesalers are: Current hair gel New foam productUnit selling price 2.00 2.25Unit variable costs 0.85 1.25 Hair Zone expects to sell 1 million units of the new styling foam in the first year after introduction, but it expects that 60 per cent of those sales will come from buyers who normally purchase Hair Zone’s styling gel. Hair Zone estimates that it would sell 1.5 million units of the gel if it did not introduce the foam. If the fixed cost of launching the new foam will be €100,000 during the first year, should Hair Zone add the new product to its line? Why or why not?A landscaping company want to plan for the number of employees it needs to hire for upcoming year. In order to do planning it is good to know the demand for landscape for the previous years. The following table shows the demand for landscaping from 2019 to 2020. Help the company to forecast the demand for 2021. Period Demand Winter 2019 23 Spring 2019 1000 Summer 2019 1300 Fall 2019 200 Winter 2020 34 Spring 2020 1050 Summer 2020 1340 Fall 2020 330 show workfor managing its data processing operation: continuing with its own staff, hiring an outside vendor to do the managing (referred to as outsourcing), or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands) depends on demand as follows. DEMAND STAFFING OPTIONS HIGH MEDIUM LOW Own Staff 650 650 600 Outside Vendor 900 600 300 Combination 800 650 500 Based on decision analysis under uncertainty, determine the best decision each of the model. Then compare all the model decision to make it overall conclusion.
- GIANTS, a sole trader extracted the following trial balance from her books at the close of business on 31st December, 2016: Dr Cr GHȻ GHȻ Purchases and sales 61,420 127,245 Inventory 1 January, 2016 7,940 Capital 1 January, 2016 25,200 Bank overdraft 2,490 Cash 140 Discounts 2,480 62 Returns 3,486 1,356 Carriage outwards 3,210 Rent and insurance 8,870 Allowance for doubtful debts 630 Fixtures and fittings 1,900 Van 5,600 Accounts receivable and trade payable 12,418 11,400 Drawings 21,400 Wages and salaries 39,200 General office expenses 319 168,383 168,383 Additional information: (a) Inventory 31st December, 2016 GHȻ 6,805 (b) Wages and salaries accrued at 31st December, 2016 GHȻ 3,500; Office expenses GHȻ 16 (c) Rent prepaid 31st December, 2016 GHȻ 600 (d) Increase in allowance for doubtful debts by GHȻ 110 to GHȻ 740 (e) Provide for depreciation as follows: Fixtures and fittings GHȻ 190 and Van GHȻ 1,400 5 Required: a) Prepare the income statement…A leading manufacturer of video games is about to introduce four new games. The accompanying tablesummarizes price and cost data, Combined fixed costs equal $600,000. A marketing research study predicts thatfor each unit sold of Diablo, 2 units of Call of Duty: Modern Warfare, 3 units of Sekiro and 4 units of Starcraft IIwill be sold.GamesDiablo Call of Duty Sekiro Starcraft IISelling Price (in dollars) 55 48 33 22Variable cost/unit (in dollars) 22 17 12 11a) How many product mix units must be sold to break even?b) How does it translate into sales of individual games?LPM Corp. produces and sells two types of frozen burgers, Turkey Burgers and Veggie Burgers. In the most recent month, the firm sold 12,000 Turkey Burgers and 8,000 Veggie Burgers. Turkey Burgers sold for $14.00 per box and variable costs were $7.40 per box. The Veggie Burgers sold for $16.00 per box and variable costs were $8.25 per box. The fixed expenses of the entire company were $41,160. If the sales mix were to shift toward the Turkey Burgers product line with total sales volume remaining constant at 20,000, the overall break-even point for the entire company: