Assignment Is Due Sunday, May 1st, 2016 At 8 Am Eastern Time

Assignment Is Due Sunday May 1st 2016 At 8am Eastern Timeapa Formattto

Assignment is due Sunday May 1st 2016 at 8AM EASTERN TIME APA FORMATTT Option #1: Cost of Operation Exercise Toy Box, Inc., is contemplating expanding sales of their children’s toys. The have an opportunity to stock and sell the X toy that has been a big hit with children everywhere. They must order the X toys from the manufacturer in a minimum order of 100 at a cost of $12 each. They could resell the X toy in their store for $22 each. Due to anticipated demand, Toy Box, Inc., will need to hire an additional part-time cashier at $600 a month, which will be classified as a fixed-cost attributable to the X toy. In addition, they have offered a $1 sales commission per toy to their floor sales representative. Finally, they will include a package of trading cards with every purchase of an X toy, which will cost them an additional $2 each. Instructions: In a well-written paper, answer the questions and perform the calculations described below: To make the project worthwhile, Toy Box, Inc., would require a $5,000 profit per month. What level of sales, in units and in dollars, would be required to reach this target profit? Show all computations completely, in a table inserted into your document. Assume that the venture is undertaken and an order is placed for 100 X toys. What would be Toy Box’s break-even point in units and in sales dollars? Show computations completely in an inserted table, and explain the reasoning behind your answer. You can ignore the fixed cost of $600 for this part. Your paper must be written in Word and should meet the following requirements: 2-3 pages in length, with all calculations in tables inserted in the document.

Paper For Above instruction

The decision to expand the sales of a new toy product involves careful financial analysis to determine the profitability and viability of such an initiative. Toy Box, Inc. is considering stocking and selling the X toy, which has gained popularity among children. The primary financial considerations include understanding the sales volume needed to achieve target profit levels and identifying the break-even point for the venture. This analysis involves calculating fixed and variable costs, contribution margins, and total sales required to meet financial goals.

Cost and Revenue Structure

In assessing the potential profitability of the X toy, we first analyze the costs associated with selling the product. The manufacturer requires a minimum order of 100 units at a cost of $12 each. The selling price is set at $22 per unit, creating a gross profit of $10 per toy before considering additional costs. The variable costs per toy include a $1 sales commission and $2 for the trading card package, totaling $3. These variable costs sum with the unit cost to give a comprehensive picture of the variable expenses per unit:

• Cost of Goods Sold (COGS): $12
• Sales commission: $1
• Packaging (trading cards): $2

The total variable cost per unit then sums to $15 ($12 + $1 + $2). The contribution margin per unit, which is the selling price minus variable costs, is therefore:

Contribution Margin = $22 - $15 = $7 per unit

Fixed costs include an additional part-time cashier at $600 per month, which is attributable to the project. For the purpose of this analysis, fixed costs are considered as $600 since the problem states to ignore fixed costs in the break-even analysis for the initial order. However, to reach a targeted profit, fixed costs and desired profit margins are included in calculations.

Target Profit Analysis

To achieve a profit of $5,000 per month, the total contribution margin must cover both fixed costs and this profit margin. The total contribution needed is:

• Total Fixed Costs: $600
• Desired Profit: $5,000
• Total Contribution Margin Required = $600 + $5,000 = $5,600

Using the contribution margin per unit ($7), the required sales volume in units to meet this goal is:

Correspondingly, the sales revenue in dollars needed to reach this sales volume is:

Break-even Analysis

Assuming an initial order of 100 units, the break-even point is where total sales revenue equals total costs, with contribution margin covering fixed costs without any profit margin. Since fixed costs are ignored for this part, the break-even volume is where:

• Total Contribution Margin = Fixed costs (ignored here) for simplicity, or covering only variable costs

But generally, the break-even point in units is calculated by:

Since the problem specifically states to ignore the fixed costs of $600 for the break-even analysis, the break-even point is essentially when total contribution margin equals zero, which is at the minimal order quantity of 100 units (since that is the minimum order). Therefore, the minimum sales in dollars at break-even are:

\(100 \text{ units} \times \$22 = \$2,200\)

Conclusion

The financial analysis indicates that to achieve a target profit of $5,000, Toy Box, Inc. must sell approximately 800 units of the X toy, generating $17,600 in sales revenue. The minimum ordered quantity of 100 units breaks even at $2,200 in sales, but to reach profitability and cover fixed costs with desired profit levels, significantly higher sales volume is required. These calculations help in planning inventory and marketing strategies to ensure the profitability of the new toy initiative.

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