Reference no: EM133037982

Question - Breakeven analysis - Molly Jasper and her? sister, Caitlin? Peters, got into the novelties business almost by accident.? Molly, a talented? sculptor, often made little figurines as gifts for friends.? Occasionally, she and Caitlin would set up a booth at a crafts fair and sell a few of the figurines along with jewelry that Caitlin made. Little by? little, demand for the? figurines, now called? Mollycaits, grew, and the sisters began to reproduce some of the favorites in? resin, using molds of the originals. The day came when a buyer for a major department store offered them a contract to produce 1,500 figurines of various designs for $10,000. Molly and Caitlin realized that it was time to get down to business. To make bookkeeping? simpler, Molly had priced all of the figurines at $8.00. Variable operating costs amounted to an average of $6.00 per unit. To produce the?order, Molly and Caitlin would have to rent industrial facilities for a? month, which would cost them $4,000.

Required -

Calculate? Mollycaits' operating breakeven point.

Calculate? Mollycaits' EBIT on the department store order.

If Molly renegotiates the contract at a price of $10.00 per? figurine, what will the EBIT? be?

If the store refuses to pay more than $8.00 per unit but is willing to negotiate? quantity, what quantity of figurines will result in an EBIT of $4,000??

At this? time, Mollycaits come in 15 different varieties. Whereas the average variable cost per unit is $6.00?, the actual cost varies from unit to unit. What recommendation would you have for Molly and Caitlin with regard to pricing? and/or the numbers and types of units that they offer for?sale?