Week 6 Assignment

  • Part 1: Calculate the      break-even point for the toy company under each of the two different      scenarios using a spreadsheet program such as Excel. Be sure to apply the      appropriate accounting process to determine the break-even points.
  • Part 2: Recommend which      option, based on the scenarios for the company, that you would select      using a word processing program such as Word. Support your conclusion with      both a written analysis and quantitative data.

Week 6 Assignment

Sage Smithe is planning to make a unique toy that promises to keep small children entertained for hours. Sage believes that parents everywhere will want to buy this toy. With a selling price of $40, Sage now needs to determine the costs and the required number of toys needed to be sold before earning a profit, the break-even point.

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After researching the costs to produce the toy, the following two locations with associated costs have been determined:

· The rent for the small facility will be $2,500 per month, insurance $880 per month, and other fixed costs are estimated at $3,100 per month. This facility has a capacity to produce 100 toys per month at a variable cost for each toy of $4.00.

· The rent for a larger facility will be $6,000 per month, insurance $1,000 per month, and other fixed costs are estimated at $3,800 per month. This facility has a capacity to produce 400 toys per month at a variable cost for each toy of $4.00.