Reference no: EM13259302

The individual portion of thisassignment is for each person to produce his/her own solution tothe following. Claire's Antiques has fixed cost of $75,000per month. Each antique has the following identifiable sales price,variable material costs, and fixed monthly costs, respectively.

When Claire's Antiques sellsantiques through a distributor they pay a sales commission of 10%of the sales price. It sells 70% of each antique through itsdistributors. Assume that the fixed costs are allocated 20%, 35%,and 45% to the Clocks, Dinette Sets, and Bedroom Suites,respectively. Currently, the allocations are based on estimateddesign time for each antique.

1. Calculate the contribution margin for each antique. For purposes of this computation, ignore the sales commission as one of the variable cost.
2. Calculate the MONTHLY break-evenunits for each antique, once again, ignoring the variable cost forthe sales commission.
3. This year, Claire's Antiquesexpects to sell 620 units of clocks, 180 units of dinette sets, and110 units of bedroom suites, (70% through distributors asexpected). Prepare a contribution margin income statement (withsales, each type of variable expense (material and salescommission), and fixed expenses) for Claire's Antiques basedupon these sales volumes.
4. The distributors are nowrequesting a 15% commission on all antiques. Claire'sAntiques does not want to change the selling prices of its antiquesin order to absorb this increase. Compute by how much will it haveto reduce other costs to make up for this request? What othercounter-proposals could be suggested?
5. Claire's Antiques is facingfierce competition from a new company, and management decides tolower the selling price of the dinette sets by 10%. Also, theydecide to acquire additional advertising at a cost of $1,000 permonth. This cost will be allocated only to the dinette sets.Recalculate their Break Even (for the dinette sets only) pointgiven the new information. Ignore sales commissionscompletely.