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201-Wk1-2-Solution to end prob-S'12

# 201-Wk1-2-Solution to end prob-S'12 - V Additional problems...

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Page 39 V. Additional problems Problem 1: MARIETTA BRUIN - Identification of costs: Last year after graduating from Indiana University with a B.A. in English, Marietta Bruin found it difficult to find a job. She is currently working as a sales clerk at the Ann Taylor store in Indianapolis, but is unhappy with her prospects. While in college Marietta traveled to Germany and observed the use of simple plastic clips to close all types of bags. As this product is unknown in the U.S., Marietta thought she might quit her current job to produce and market these clips. Marietta’s uncle is in the plastics business and has promised to help. Her uncle has a warehouse that he will lease it to Marietta for \$200/month to use as a production facility. The clips will be sold in boxes of 10 clips. It will cost \$0.30 for the raw plastic to make a box of clips. Marietta will hire two friends at \$8.00/hour as part time employees to help in the production process. Marietta’s major expense will be the purchase of a \$10,450 press that will be used to form the clips—this press should last a number of years. Marietta has estimated it will cost \$250/month for miscellaneous production supplies. To sell the clips, Marietta expects to advertise widely, spending \$1,000 per month in the first year. While Marietta will try to convince local retailers to carry her product, Marietta will also pay friends a sales commission of \$0.10/box for any units that they sell. Marietta plans to install two new phone lines, one in the warehouse and one to her home (the house was a graduation gift from her wealthy uncle) which she will use as a sales headquarters; each line will cost approximately \$50/month. She also plans to employ a phone answering service at \$60/month. Page 40 Marietta has savings of \$3,000 that she will withdraw and use to facilitate her business (use as working capital). As she has no business background, she plans to hire her brother (a management student at Purdue University) for 10 hours each week to keep the books.

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