Phil Pfeifer owns a business refurbishing Army Surplus calculators. He has a con
ID: 1102966 • Letter: P
Question
Phil Pfeifer owns a business refurbishing Army Surplus calculators. He has a contract to buy the calculators from government sources and could purchase up to 4,820 a month. His bid of $4.22 per calculator had won the contract to purchase the surplus calculators. He invested $36,500 in an automated engraving machine and started selling personalized calculators through a network of army surplus stores and VFW posts. ricing was a problem, however. First he had to consider that, on average, his resellers charged 5% margins and were content to sell at his recommended retail prices as long as they received their margins. Second, he thought it cost him $1.13 in labor and materials to engrave customized messages. For several months he sold an average of 1,090 calculators per month at a retail selling price of $34 per customized calculator. His wife suggested he could watch more lacrosse if he charged higher prices and sold fewer calculators. Phil raised the price to $41 and saw the number of calculators sold drop to 763. How much total dollar contribution to fixed cost (aka gross margin) did Phil make selling calculators at his original price in a month?Explanation / Answer
Phile Pfeifer owns a business refurbishing Army Surplus calculators.
To buy the calculators from government sources and could purchase up to 4,820 per month.
His bid per calculator is $4.22.
How much total dollar contribution to fixed cost (aka gross margin) did Phil make selling calculators at his original price in a month?
using a formula, we have
TC = TFC + VX
where, X = number of units = 1090
V = unit variable cost = $34
TFC = total fixed cost = $36,500
then, we get
TC = [($36,500) + ($34) (1090)]
TC = [($36,500) + ($37,060)]
TC = $73,560