ANSWER NO.3

3. (10 marks) Hard Core produces different size Medicine Balls for sale to gym facilities. The most popular size Medicine Ball is the 10 kg ball. It sells for $60 each and costs $15 in materials and $2 to run the equipment. Last year Hard Core sold 1000 units of the 10 kg Medicine Ball with annual fixed costs of $50,000. 4. (18 marks) The Newfoundland Wine Company has recently introduced its new brand of red wine, called Red Rocks. To date, demand for the product for the first three months is as follows: Month a) (3 marks)Calculate the break-even point in units for the 10 kg Medicine Ball. April May June Actual Demand 2,200 3,600 4,000 b) (marks)What is the revenue at the breakeven quantity found in part a)? a) (13 marks) Using the Trend Adjusted Exponential Smoothing model, calculate the 4 month forecast (July); let a = 0.5 and 3 =0.7 (start with initial estimates of s (or Sken) = 2,000 and T. (or Ten) = 400). c) (2 marks)At the current level of activity is Hard Core generating a profit (loss) from the 10 kg Medicine Bal? if so how much? d) (3 marks) How many more 10 kg Medicine Balls would Hard Core have to sell each year to generate an annual profit of $50,000? B3401 Spring 2011 Term Test Page B:401 Spring 2011 Term Test Pages