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01 Task Performance 1

1. Molly's current monthly volume is 2,000 items. 2. For Molly to break even on the new equipment, she would need to increase her monthly volume by 529 items. 3. If Molly increases her monthly volume to 4,300 items with the new equipment, her monthly profit over the next 3 years would be P1,505. After 3 years, once the equipment is paid off, her monthly profit would be P1,955.

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Millania Thana
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98 views3 pages

01 Task Performance 1

1. Molly's current monthly volume is 2,000 items. 2. For Molly to break even on the new equipment, she would need to increase her monthly volume by 529 items. 3. If Molly increases her monthly volume to 4,300 items with the new equipment, her monthly profit over the next 3 years would be P1,505. After 3 years, once the equipment is paid off, her monthly profit would be P1,955.

Uploaded by

Millania Thana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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1. What is Molly’s current monthly volume?

P 1,700
Current monthly volume=
( P1.10−P 0.25 )
P1,700
Current monthly volume=
P0.85
Current monthly volume=P 2,000

2. If Molly purchases the new equipment, how many additional items will she have to dry-clean
each month to break even? Assuming that the new equipment would be paid in 36 months
installment.
P 2,150
ν=
P 1.10−P 0.25
ν=P 2,529.41
Cf = (P1,700 + (P16,200/36 months)

3. Molly estimates that with the new equipment, she can increase her volume to 4,300 items
per month. What monthly profit would she realize with that level of business during the next
three (3) years?
a. After three (3) years?
For the next 3 years
Profit=Total Revenue−Total Cost
Total Revenue=P 4,300 x P 1.10
Total Revenue=P 4,730
Total Cost =P 1,700+ ( P16,200 / 36 mos ) + P 4,300 xP 0.25
Total Cost =P 2,150+ P1,075
Total Cost =P 3,225
Profit=P 4730−P3,225
Profit=P 1,505
Molly’s monthly profit during the next 3 years is P1,505.
After 3 years
Total Revenue=P 4,300 x P 1.10
Total Revenue=P 4,730
Total Cost + P 1,700+ ( P 4,300 xP 0.25 )
Total Cost =P 1,700+ P1,075
Total Cost =P 2,775
Profit=P 4730−P2,775
Profit=P 1,955
Once the new machinery is paid in full, Molly’s monthly profit after the next 3 years is
P1,955.

4. Molly believes that if she doesn’t but the new equipment but lowers her price to P0.99 per
item, she will increase her business volume.
a. What will her new break-even be if she lowers her price?
Break −even=Total Cost =Total Cost
0.99 v =1,700+0.25 v
1,700=0.99 v−0.25 v
1,700=0.74 v
v=2,297
Molly’s break-even volume is 2,297, if she lowers her price.

b. What will her monthly profit be if her price reduction results in a monthly volume of
3,800 items?
Profit=Total Revenue−Total Cost
Total Revenue=3,800 x P 0.99
Total Revenue=P 3,762
TotalCost =P 1,700+ ( 3,800 xP 0.25 )
Total Cost =P 1,700+ P 950
Total Cost =P 2,650
Profit=P 3,762−P 2,650
Profit=P 1,112
So, Molly’s monthly profit will be P1,112.

5. Molly estimates that if she purchases the new equipment and lowers her price to ₱0.99 per
item, her volume will increase to about 4,700 units per month. Based on the local market, that
is the largest volume she can realistically expect. What should Molly do?

Profit=Total Revenue−Total Cost


Total Revenue=4,700 x P 0.99
Total Revenue=P 4,653
TotalCost=P 2,150+ ( 4,700 xP 0.25 )
Total Cost =P 2,150+ P1,175
Total Cost =P 3,325
Profit=P 4,653−P3,325
Profit=P 1,328

If Molly buy the equipment, she has to take consideration the extra cost that she has to add
to the fixed cost. If the installment is for 3 years, this will add P450 per month to her fixed
costs making it to P2,150 per month. So, her profit will be P1,328.

Profit=Total Revenue−Total Cost


Total Revenue=4,700 x P 0.99
Total Revenue=P 4,653
TotalCost =P 1,700+ ( 4,700 xP 0.25 )
Total Cost =P 1,700+ P1,175
Total Cost =P 2,875
Profit=P 4,653−P2,875
Profit=P 1,778

If Molly’s did not purchase the new equipment, she can expect to see a monthly profit of
P1,778. So, Molly should noy buy the new equipment because her monthly will decrease from
P1,778 to P1,328 if she buys the new equipment.
Teacher’s Comment:
2. 529 (-4)

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