P4-31 Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $2.9 per unit. Enough capacity exists in the company’s plant to produce 30,900 units of the toy each month. Variable costs to manufacture and sell one unit would be $1.84, and fixed costs associated with the toy would total $48,631 per month.
The company’s Marketing Department predicts that demand for the new toy will exceed the 30,900 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed cost of $2,432 per month. Variable costs in the rented facility would total $2.03 per unit, due to somewhat less efficient operations than in the main plant.
Requirement 1:
(a) Calculate the contribution margin per unit on anything over 30,900 units. (Round your answer to 2 decimal places. Omit the “$” sign in your response.) Contribution margin $
(b) Compute the total fixed costs to be covered if more than 30,900 units are produced. (Omit the “$” sign in your response) Total fixed costs to be covered by remaining sales $
(c) Compute the monthly break-even point for the new toy in units and in total sales dollars. (Round your answers to the nearest whole number. Omit the “$” sign in your response.)
Monthly break-even point in unit sales units
Monthly break-even point in dollar sales
Requirement 2:
How many units must be sold each month to make a monthly profit of $10,962?
Units to be sold units
Requirement 3:
If the sales manager receives a bonus of 20 cents for each unit sold in excess of the break-even point, how many units must be sold each month to earn a return of 21% on the monthly investment in fixed costs? (Round your answer to the nearest whole number.)
Total units to be sold units
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