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big_star_condiments_-case x
Big Star Condiments produces salsa consumed primarily in North American restaurants. Given below is the projected income statement for the company for 2011.
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Projected Income Statement (2011) |
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Sales ( 100,000 cases at $6.50 per case) |
$650,000 |
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Cost of goods sold: |
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Materials |
$170,000 |
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Labor |
$205,000 |
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Fixed manufacturing expenses |
$40,000 |
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Administrative and selling expenses: |
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Delivery |
$25,000 |
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Commissions |
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Advertising |
$10,000 |
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Travel |
$5,000 |
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Fixed administrative and selling expenses |
$12,000 |
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Total costs |
$507,000 |
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Net income before taxes |
$143,000 |
Create a report answering the following questions:
Variable cost =455000 for 1,00,000 units sold. Per unit VC = 4.55 using in the table above and the fixed cost is 52000.
· Complete the following table using a fully functional Microsoft Excel spreadsheet showing Marginal Revenue (MR), Marginal Cost (MC), Total Revenue (TR), Total Cost (TC), Total Variable Cost (TVC), Total Fixed Cost (TFC), and profits at all possible output levels.
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Price |
Quantity |
Total Revenue |
Total Variable Cost |
Total Fixed Cost |
Total Cost |
Profit |
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$8.00 |
65,000 |
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$7.75 |
75,000 |
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$7.50 |
80,000 |
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$7.25 |
90,000 |
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$7.00 |
100,000 | |||||
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$6.75 |
115,000 |
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| $6.50 |
120,000 |
· Using Excel, prepare a graph showing the breakeven point and any profit or loss at the current price of $6.50. Explain to the Big Star management the implications of this analysis.
· What is the elasticity coefficient for each price between $6.50 and $7.50? Is the demand elastic or inelastic at these points?
· On the basis of your calculations and the information above, what recommendations would you make to Big Star Condiments in terms of pricing and output levels?
