Sally Marley
Autor: Dan Nguyen • September 19, 2016 • Case Study • 711 Words (3 Pages) • 508 Views
BADM 3963 CRN 21476
N00196056
Real world experience 1
Sally Marley has come up for some help in starting her new high-end kite company. The chart below shows all the information she has provided.
Item | Cost |
Design software | $12,000 |
Graphic designer fee | $10,000 |
Promotional materials | $3,500 |
Fifteen feet of string is required per kite | $0.20 per foot (Total $3) |
Four yards of special fabric | $1.50 per yard (Total $6) |
20.5 feet of 1/2 inch wood dowel | $0.35 per foot (Total $7.18) |
Special molded plastic handle | $4 each |
1 ½ hours of assembly labor | $20 per hour (Total $30) |
Total fixed cost | $25,500 |
Total variable cost | $50.18 |
Sally thinks she can sell these kites for $75, with the total fixed cost of $25,500 and the total variable cost of $50.18, based on all the information above, we can find BEP volume unit sales annually which is 1027 units. But, Sally is also concerned about her pricing. These are very high-end kites and could sell for more than the planned price of $75. Assumed that Sally will not change any information she has provided and she wants to raise the selling price to $90, the BEP volume unit sales annually will now change to 640 units. All the data could be collected if Sally did some research beforehand, and for the selling price, she can compare her selling price with other kite companies and come up with those numbers.
If Sally keeps the selling price to stay at the $75 and the $90 price, with the same total fixed cost and variable cost, to generate an annual profit of $6,000, before taxes, Sally must sell 1269 and 791 units accordingly.
Item | Cost |
Celebrity endorsement | $21,000 |
Design software | $12,000 |
Graphic designer fee | $10,000 |
Promotional materials | $3,500 |
Fifteen feet of string is required per kite | $0.20 per foot (Total $3) |
Four yards of special fabric | $1.50 per yard (Total $6) |
20.5 feet of 1/2 inch wood dowel | $0.35 per foot (Total $7.18) |
Special molded plastic handle | $4 each |
1 ½ hours of assembly labor | $20 per hour (Total $30) |
Total fixed cost | $46,500 |
Total variable cost | $50.18 |
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