RMG301 Decision Making Problems – Practice Sheet
Productivity, Breakeven, Stock Turns
The Mid Term will have questions similar to these.
I shall provide an answer sheet in the next couple of days. My advice is that you try on your own
and check your answer once you complete the question.
Help is available:
There are great resources via the Internet
Me: phone me (416-893-1980), email me or come to my office TRS3-040
Our TA; Samantha Simons, email [email protected]
Word of advice: Practice, practice, practice
# Question Answer
1. A new product is being considered that will require $45,000 $18.35
in fixed costs per year. Variable costs per unit are estimated
to be $12.72. The firm wants to break even if 8000 units are
produced and sold per year. What should be the price?
2. A new luxury soap is to be introduced to the market. The 1,000,000
advertising campaign will cost $500,000. Each bar of soap
costs $1 and is sold for $1.50.
a. What is the breakeven quantity?
b. 1,200,000 bars of soap are sold. What is the profit?
The break-even quantity for a certain kitchen appliance is
6000 units. The selling price is $10 per unit, and the variable
cost is $4 per unit. What must be the fixed cost to break even
at 6000 units?
At the beginning of the year, the inventory of perfume is $ 27.5 wks
60,000 . At the end of the year, the inventory is $ 50,000 .
Sales are an average of $ 2,000 per week.
a. What is the stock turn?
b. How frequently is your stock turning, measured in
weeks? # Answer
5. Joe operates 3 hardware stores. Store 1 is 2,200 sq ft. Store 3,000 sq ft
2 is 2,700 sq ft. Store 3 is 4,100 sq ft. Total annual sales are $500 per sq