Abc Toys Company Exercise

261 Words2 Pages
Exercise: ABC Toys company 1. Direct Variable Costs= 3 x750 000=$2,250,000 Direct Fixed Costs= 3x750 000= $3,000,000 Administrative Overhead= $1,500,000 Full cost= 6,750,000 Revenue= 9x750 000= 6,750,000 Profit= 1.5 x750 000= 0 2. Unit selling price = $9,00per unit; increase of 10%  $9,90, sales = 1,000,000-900,000=810,000units Direct Variable Costs $3x810,000= $2,700,00 $3.00 Direct Fixed Costs + $3,000,000 $3.00 Administrative Overhead + $1,500,000 $1.50 Full cost = $6,750,000 $8.00 Revenue 810,000x$9.9= $8,910,000 $9.90 Profit $8,019,000- $6,930,000= $1,710,000 $1.90 3. Unit selling price = $8.10 per unit; unit sales = 1.1million unit Direct Variable Costs $3x1,100,000= $3,300,000 $3.00 Direct Fixed Costs + $3,000,000 $3.00 Administrative Overhead + $1,500,000 $1.50 Full cost = $7,800,000 $7.09 Revenue 1,100,000x$8.1=$8,910,000 $8.10 Profit $1,110,000 $1 4. Marketing implications of each price strategy: If ABC Toys increases the price to $9.90 and it sales decrease (to 810,000units), it will make more profit: $1.35 per unit. Otherwise, whether ABC Toys decreases the price to $8.10, it sales increases to 1,100,000units the profit will be less interesting and about $1 per unit. To conclude, ABC toys should increase it price, the sales will be less important but it will make more
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