ORIE 350
Homework #10
Answers
1.
Sundance Inc. makes quality trampolines for home use and for cheerleading and dance
teams.
They have three models, the Prohopper, the Octagon, and the Elite.
Last year,
sales were as follows:
Prohopper
Octagon
Elite
Sales (units)
140
160
80
Sales ($)
$168,000
$288,000
$280,000
Variable costs (per unit)
Manufacturing
$300
$400
$600
Selling
$100
$100
$100
Fixed costs (total):
Manufacturing$120,000, Selling, Admin.$280,000
a)
Assuming the product mix is constant, find the breakeven point in units of each
model.
Prohopper:
s = $1,200/unit, v = $400/unit
Octagon:
s = $1,800/unit, v = $500/unit
Elite:
s = $3,500/unit, v = $700/unit
Assemble a basket of 7 Prohoppers, 8 Octagons, and 4 Elites (divide sales by 20)
The selling price of a basket is 7(1,200) + 8(1,800) + 4(3,500) = $36,800
The variable cost of a basket is 7(400) + 8(500) + 4(700) = $9,600
The fixed cost is $400,000
BE
f
400,000
n
14.705882
s v
36,800 9,600
=
=
=


Prohoppers:
103 units,
Octagon:
118 units,
Elite:
59 units
All numbers are rounded to the nearest integer
b)
Find the annual sales dollars (total) needed to breakeven.
Sales = 103(1,200) + 118(1,800) + 59(3,500) = $542,500
The actual number is closer to $541,176, using exact numbers (nonrounded).
But, you
can’t sell a fraction of a trampoline, so the $542,500 number is probably better for
planning purposes.