ORIE_350_Homework__10_spring_2007_answers - ORIE 350...

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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 (non-rounded). But, you can’t sell a fraction of a trampoline, so the $542,500 number is probably better for planning purposes.
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