Anticipated Demand: Toy Box Inc.
children’s toys. The have an opportunity to stock and sell the X toy that has
been a big hit with children everywhere. They need to 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. Also, they have offered a $1 sales
commission per toy to their floor sales representative. They will also include
a package of trading cards with every purchase of an X toy, which will cost
them an additional $2 each.
Required:
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.
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 and explain the reasoning behind your answer. You
can ignore the fixed cost of $600 for this part.
ScholarMatic: Explanation & Answer
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