Practice Midterm 02 - Answer Key

This preview shows pages 1–3. Sign up to view the full content.

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

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
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
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}