Question 2 Valentine Company sells toys for $25 each. Variable cost per toy is $10. The company is planning on renting a
Posted: Tue Apr 26, 2022 9:43 am
Question 2
Valentine Company sells toys for $25 each. Variable cost per toy
is $10. The company is planning on renting a promotion counter at
Mexico convention center for both display and selling purposes of
their toy. The convention coordinator allows four options for all
participant companies. They are:
1. paying a fixed promotion counter rent $5,000, or
2. paying an $4,000 fee plus 10% of revenue made at the
convention, or
3. paying 20% of revenue made at the convention
4. paying an advertising cost $2,000 and $1,000 for insurance
fee
Required:
a) Compute the breakeven sales in unit for each option. (9
marks)
b) Assuming sales are expected to be 800 toys, which
option should Valentine Company choose? (11 marks)
Valentine Company sells toys for $25 each. Variable cost per toy
is $10. The company is planning on renting a promotion counter at
Mexico convention center for both display and selling purposes of
their toy. The convention coordinator allows four options for all
participant companies. They are:
1. paying a fixed promotion counter rent $5,000, or
2. paying an $4,000 fee plus 10% of revenue made at the
convention, or
3. paying 20% of revenue made at the convention
4. paying an advertising cost $2,000 and $1,000 for insurance
fee
Required:
a) Compute the breakeven sales in unit for each option. (9
marks)
b) Assuming sales are expected to be 800 toys, which
option should Valentine Company choose? (11 marks)