Practice Midterm 02 - Answer Key

Practice Midterm 02 - Answer Key - Practice Midterm Answer...

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Practice Midterm Answer Key Question #1 – Break even Determining fixed costs Fixed Costs Depreciation Years Total Description Equipment 1,750,000 10 175,000 Depreciated over 10 years Maintenance 200,000 1 200,000 Employees 105,000 1 105,000 Advertising 1,800,000 3 600,000 1.8 Million over 3 years Total $1,080,000 Figuring out Contribution to Oscar Mayer (OM) Retail Price $1.56 From case Retail Margin 25% From case Wholesale Price $ 1.17 1.56 * (1 - .25) = 1.17 Wholesale Markup 30% OM Revenue/unit $ 0.90 = 1.17 / 1.30 ( NOT 1.17 * .7!!!) Chicken $ 0.35 Processing $ 0.17 Freight & Pkg. $ 0.06 Labor $ 0.05 Total VC $ 0.63 Unit contribution $ 0.27 = .90 - .63, from above Beef Hotdog Contribution OM Selling price $1.10 From problem VC $ 0.68 From problem Contribution $0.42 Difference $(0.15) Loss on each cannibalized unit
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Answers to each question part. You need to reference the above calculations as well. Calculations Description Answer Part A $ 1,080,000 FC Year 1 4,000,000 $ 0.27 Contribution/unit (see above) units B 125,000 units/week $675,000 52 weeks/year 6,500,000 units/year
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Practice Midterm 02 - Answer Key - Practice Midterm Answer...

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