Brewery Ipana Oy has found some potential long-time partners in the restaurant business. To optimize the supply
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Question:
- Brewery Ipana Oy has found some potential long-time partners in the restaurant business. To optimize the supply chain, the company is negotiating for contracts that would allow all production in the coming years to be sold to these partners. The contracts aim to shift production to 20 liter barrels of beer, which would become the sole product of Ipana Oy. In case the negotiations are successful, Ipana Oy estimates its typical year would look as follows: the quantity shipped to the customer is 18000 units at a price of 300 €/unit. The gross profit percentage is 40 % and the yearly fixed costs are 1500000 €.
- Additional information:
- The variable cost per unit [€/unit] for products that would be produced in the scenario above: 180 €/unit The critical sales price in the estimate: 264 €/product The EBITDA (earnings before interests, taxes, depreciations and amortizations) of a typical year :
- 660000 € The critical sales volume in the estimate:
- 12500 units Question:To make the contracts more attractive for customers,brewery Ipana Oy is considering lowering the sales price per product by 10% from the initial estimate. Estimated sales volume, price, and fixed costs would remain as they are.When the sales price was lowered 10%,the gross profit percentage was 33.33%.What would the critical sales volume be if the sales price was lowered by 10%?
- Note: 13,235 units is not the correct answer. Please show the correct calculation of what would the critical sales volume be if the sales price was lowered by 10%?
Related Book For
Operations Management Managing Global Supply Chains
ISBN: 978-1506302935
1st edition
Authors: Ray R. Venkataraman, Jeffrey K. Pinto
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