Scribd
Upload
70 views1 page

ms1 2

Lola Flora Company wants to produce a new inflatable toy and can produce 16,000 units per month in their main plant. It costs $12.50 per unit to manufacture in their plant plus $350,000 in fixed costs. They may rent additional space for $10,000 per month where costs are $14 per unit to produce more. The toy will sell for $30 each.

Uploaded by

ALMA MORENA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
70 views1 page

ms1 2

Lola Flora Company wants to produce a new inflatable toy and can produce 16,000 units per month in their main plant. It costs $12.50 per unit to manufacture in their plant plus $350,000 in fixed costs. They may rent additional space for $10,000 per month where costs are $14 per unit to produce more. The toy will sell for $30 each.

Uploaded by

ALMA MORENA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 1

For items 51-54:

Lola Flora 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. Enough capacity exists in the company’s plant to
produce 16,000 units of the toy each month. Variable costs to manufacture and sell one unit would be P12.50, and fixed
costs associated with the toy would total P350,000 per month.

The company’s Marketing Department predicts that demand for the new toy will exceed the 16,000 units that the company
is able to produce. Additional manufacturing space can be rented from another company at a fixed cost of P10,000 per
month. Variable costs in the rented facility would total P14 per unit, due to somewhat less efficient operations than in the
main plant. The new toy will sell for P30 per unit.

51. The breakeven units for the new toy would be:
52. How many units should the company need to sell in order to earn a before-tax profit of P150,000?
53. If the sales manager receives a bonus of P1.00 for each unit sold in excess of the break-even point, how many units
must be sold each
month to earn a return of 25% on the monthly investment in fixed costs?
54. Assuming that Lola Flora Company will just rent a manufacturing space for a month in order to produce special order
for 8,000 toys. What
is the acceptable minimum selling price to Lola Flora Company for the special sale?

You might also like