Your Fan retails computer fans in two sizes: small and large. The business has provided you with the following information for a regular month of trading: Small fans Large fans Selling price ($ per fan) Purchase price ($ per fan) Delivery cost to customer ($ per fan) Monthly fixed cost ($) 37 60 26 39 1.0 1.5 20,000 Average monthly sales volume (units) 900 550 Business owners are considering selling computer fans in one size only. Retailing one fan size would mean lower purchase cost and selling price per unit and larger monthly sales volume. The table below

Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter12: Fainancial Statement Analysis
Section: Chapter Questions
Problem 84PSA
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Your Fan retails computer fans in two sizes: small and large. The business has provided you with the
following information for a regular month of trading:
Small fans
Large fans
60
Selling price ($ per fan)
Purchase price ($ per fan)
37
26
39
Delivery cost to customer ($ per fan)
Monthly fixed cost ($)
Average monthly sales volume (units)
1.0
1.5
20,000
900
550
Business owners are considering selling computer fans in one size only. Retailing one fan size would
mean lower purchase cost and selling price per unit and larger monthly sales volume. The table below
reflects how trading would change if only small or large fans were sold.
Only small fans
32
Only large fans
Selling price ($)
Purchase price ($)
54
20
32.5
Delivery cost to customer ($ per fam)
1.0
1.5
Monthly fixed cost ($)
16,800
23,000
Average monthly sales volume (units)
1,800
1,300
Required:
For each of the three scenarios (selling both fans, selling small fans only, and selling large fans only),
calculate the expected monthly profit.
Answer here:
Expected monthly profit if selling both fans:
Expected monthly profit if selling small fans only:
Expected monthly profit if selling large fans only:
Your Fan decides to switch to retailing large fans only. What would the monthly sales volume (in
dollar value) need to be to generate a monthly profit that is double of the monthly fixed cost?
Answer here:
Transcribed Image Text:Your Fan retails computer fans in two sizes: small and large. The business has provided you with the following information for a regular month of trading: Small fans Large fans 60 Selling price ($ per fan) Purchase price ($ per fan) 37 26 39 Delivery cost to customer ($ per fan) Monthly fixed cost ($) Average monthly sales volume (units) 1.0 1.5 20,000 900 550 Business owners are considering selling computer fans in one size only. Retailing one fan size would mean lower purchase cost and selling price per unit and larger monthly sales volume. The table below reflects how trading would change if only small or large fans were sold. Only small fans 32 Only large fans Selling price ($) Purchase price ($) 54 20 32.5 Delivery cost to customer ($ per fam) 1.0 1.5 Monthly fixed cost ($) 16,800 23,000 Average monthly sales volume (units) 1,800 1,300 Required: For each of the three scenarios (selling both fans, selling small fans only, and selling large fans only), calculate the expected monthly profit. Answer here: Expected monthly profit if selling both fans: Expected monthly profit if selling small fans only: Expected monthly profit if selling large fans only: Your Fan decides to switch to retailing large fans only. What would the monthly sales volume (in dollar value) need to be to generate a monthly profit that is double of the monthly fixed cost? Answer here:
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