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Option #2: CVP Relationships

Robin Simmons is ready to complete a cost-volume-profit analysis for 2016 for the Stellar Packaging Products manufacturing plant to determine if the break-even point is achieved, given the expected decline in volume. Specific costs for production of 500,000 units include the following:

Stellar Packaging Products	Variable Costs Total	Fixed Costs Total
Raw materials	$ 400,000
Direct manufacturing labor	$ 200,000
Indirect manufacturing labor		$ 105,000
Factory Insurance & Utilities		$ 63,000
Depreciation -- Machinery and factory		$ 38,500
Repairs and maintenance -- factory		$ 28,000
Selling, marketing and distribution expenses	$ 40,000	$ 80,000
General and administrative expenses		$ 120,000

There are no beginning or ending inventories. The total sales for 500,000 units produced are $2,000,000.

Instructions:

Answer the following questions given the fact pattern above, showing all calculations.

What is the contribution margin per unit for each chocolate bar produced, given the fact pattern above?
What is the Stellar Packaging’s U.S. division break-even point in units and dollars, given the fact pattern above?
What is the Stellar Packaging’s U.S. division margin of safety and degree of operating leverage, given the fact pattern above?
Write a brief explanation (approximately two paragraphs) that Simmons might deliver to management to inform them of the analytical outcome, given the projected revenue and cost. Does the company have to implement a cost-reduction strategy in order to break even?

Your paper should meet the following requirements:

2-3 pages in length
Formatted according to the APA Requirements.
Include at least 2-3 outside sources.

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.
Written and formatted according to the CSU-Global Guide to Writing and APA Requirements.
Include at least 2-3 outside sources.

I already have the answers just need paper written with calculations