Reference no: EM132218551
Question - Simon Teguh is considering investing in a vending machine operation involving 20 vending machines located in various plants around the city. The machine manufacturer reports that similar vending machine routes have produced a sales volume ranging from 600 to 800 units per machine per month. The following information is made available to Teguh in evaluating the possible profitability of the operation.
1. An investment of $45,000 will be required, $9,000 for merchandise and $36,000 for the 20 machines.
2. The machines have a service life of five years and no salvage value at the end of that period. Depreciation will be computed on the straight-line basis.
3. The merchandise (candy and soft drinks) retails for an average of 75 cents per unit and will cost Teguh an average of 25 cents per unit.
4. Owners of the buildings in which the machines are located are paid a commission of 5 cents per unit of candy and soft drinks sold.
5. One person will be hired to service the machines. The salary will be $1,500 per month.
6. Other expenses are estimated at $600 per month. These expenses do not vary with the number of units sold.
Required:
a. Determine the unit contribution margin and the break-even volume in units and in dollars per month.
b. What sales volume in units and in dollars per month will be necessary to produce an operating income equal to a 30 percent annual return on Teguh's $45,000 investment?
c. Teguh is considering offering the building owners a flat rental of $30 per machine per month in lieu of the commission of 5 cents per unit sold. What effect would this change in commission arrangement have on his monthly break-even volume in terms of units?
Discuss how strategy plays an important role in bia model
: BIAM300 Managerial Applications of Business Analytics - Devry university - Draw a strategic position diagram similar to Exhibit 2.6 in your text
|
Calculate the moving-average cost per unit at january
: Waterway Inc. is a retailer operating in British Columbia. Calculate the Moving-average cost per unit at January 1, 5, 8, 10, 15, 16, 20, & 25
|
Calculate cost of goods available for sale
: Flite Company had beginning inventory on May 1 of $12,000. Calculate cost of goods available for sale and cost of goods sold for the month
|
Explain the classification of models
: Explain the classification of models - Classification by function or uses and Classidication by degree of uncertainty
|
Determine the unit contribution margin
: An investment of $45,000 will be required, Determine the unit contribution margin and the break-even volume in units and in dollars per month
|
Difference between cost standard and an efficiency standard
: Explain the difference between a cost standard and an efficiency standard. Give an example of each. Please include your source
|
Difference between a favorable and an unfavorable variance
: Explain the difference between a favorable and an unfavorable variance. Please include your source
|
Calculate the cost of the inventory at january
: Swifty Bookstore had 450 units on hand at January 1, costing $9 each. Calculate the cost of the inventory at January 31, under the LIFO method
|
Compute the ending inventory at may
: Coronado Co. uses a periodic inventory system. Compute the ending inventory at May 31 and cost of goods sold using the FIFO and LIFO methods
|