Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed-price on- demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell each rack so that it can have a product profit margin of 28%? FIXED COSTS Research and Design Manufacturing Distribution Year 1 Year 2 Year 3 Year 4 Year 5 TOTALS P 200,000 P 30,000 P P 230,000 50,000 50,000 50,000 50,000 50,000 250,000 20,000 20,000 20,000 20,000 20,000 100,000 Customer Service 80,000 50,000 30,000 30,000 20,000 210,000 Other incremental operating costs 25,000 25,000 375,000 P 175,000 P 125,000 P 125,000 P 115,000 P 915,000 25,000 25,000 25,000 125,000 TOTALS VARIABLE COSTS PER UNIT Manufacturing 500 P 450 P 450 P 450 P 450 Distribution 100 100 100 100 100 Customer Service 50 50 50 50 50 TOTALS 650 P 600 P 600 P 600 P 600 UNITS TO BE SOLD AND PRODUCED 800 850 400 3,250 300 900

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be
producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed-price on-
demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell
each rack so that it can have a product profit margin of 28%?
FIXED COSTS
Research and Design
Manufacturing
Distribution
Year 1
Year 2
Year 3
Year 4
Year 5
TOTALS
P 200,000 P
50,000
30,000 P
P 230,000
50,000
50,000
50,000
50,000
20,000
250,000
100,000
20,000
20,000
20,000
20,000
20,000
25,000
Customer Service
80,000
50,000
30,000
30,000
210,000
25,000
25,000
375,000 P 175,000 P 125,000 P 125,000 P 115,000 P 915,000
25,000
Other incremental operating costs
TOTALS
25,000
125,000
VARIABLE COSTS PER UNIT
Manufacturing
500 P
450 P
450 P
450 P
450
Distribution
100
100
100
100
100
Customer Service
50
50
50
50
50
TOTALS
650 P
600 P
600 P
600 P
600
UNITS TO BE SOLD AND PRODUCED
300
800
850
900
400
3,250
Transcribed Image Text:Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed-price on- demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell each rack so that it can have a product profit margin of 28%? FIXED COSTS Research and Design Manufacturing Distribution Year 1 Year 2 Year 3 Year 4 Year 5 TOTALS P 200,000 P 50,000 30,000 P P 230,000 50,000 50,000 50,000 50,000 20,000 250,000 100,000 20,000 20,000 20,000 20,000 20,000 25,000 Customer Service 80,000 50,000 30,000 30,000 210,000 25,000 25,000 375,000 P 175,000 P 125,000 P 125,000 P 115,000 P 915,000 25,000 Other incremental operating costs TOTALS 25,000 125,000 VARIABLE COSTS PER UNIT Manufacturing 500 P 450 P 450 P 450 P 450 Distribution 100 100 100 100 100 Customer Service 50 50 50 50 50 TOTALS 650 P 600 P 600 P 600 P 600 UNITS TO BE SOLD AND PRODUCED 300 800 850 900 400 3,250
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