The general manager of Tangris ltée wishes to increase the sale price of its umbrellas to $ 32, that it currently sells for $ 24, despite the fact that its sales may experience a 20% decrease. He asks you to advise him on this subject since during the last fiscal year, he sold 15,000 umbrellas.
Here are the costs associated with these umbrellas :
Raw materials = $ 10.00
Direct labor = $ 5.00
Indirect variable manufacturing costs = $ 1.00
Indirect fixed manufacturing costs (per 10,000 units) = $ 1.50
Variable selling and administration fees = $ 2.00
Fixed sales and administration fees = $ 40,000
Problem A) Calculate the break-even point (breakeven point) in units and dollars relative to the sale current umbrellas. Show all your calculations.
Problem B) Advise the General Manager of Tangris Ltd., with all your calculations to back it up.
Problem C) Assuming the general manager wants a profit of $ 50,000, without changing the price umbrellas sales or the number of umbrellas sold, how much are the variable costs should they be?