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Option #1: Cost of Operation Exercise

Toy Box, Inc., is contemplating expanding sales of their childrenâ€™s toys. The have an opportunity to stock and sell the X toy that has been a big hit with children everywhere. They must order the X toys from the manufacturer in a minimum order of 100 at a cost of \$12 each. They could resell the X toy in their store for \$22 each.

Due to anticipated demand, Toy Box, Inc., will need to hire an additional part-time cashier at \$600 a month, which will be classified as a fixed-cost attributable to the X toy. In addition, they have offered a \$1 sales commission per toy to their floor sales representative. Finally, they will include a package of trading cards with every purchase of an X toy, which will cost them an additional \$2 each.

Instructions:

In a well-written paper, answer the questions and perform the calculations described below:

1. To make the project worthwhile, Toy Box, Inc., would require a \$5,000 profit per month. What level of sales, in units and in dollars, would be required to reach this target profit? Show all computations completely, in a table inserted into your document.
2. Assume that the venture is undertaken and an order is placed for 100 X toys. What would be Toy Boxâ€™s break-even point in units and in sales dollars? Show computations completely in an inserted table, and explain the reasoning behind your answer. You can ignore the fixed cost of \$600 for this part.

Your paper must be written in Word and should meet the following requirements:

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