Kamela and her sister, Jensen, got into the novelties business almost by accident. Kamela, a talented sculptor, often made little figurines as gifts for friends. Occasionally, she and Jensen would set up a booth at a crafts fair and sell a few of the figurines along with jewelry that Kamela made. Little by little, demand for the figurines, now called KamelaJens, grew, and the sisters began to reproduce some of the favorites in resin, using molds of the originals. The day came when a buyer for a major department store offered them a contract to produce 1,500 figurines of various designs for Rs.10,000. Kamela and Jensen realized that it was time to get down to business. To make bookkeeping simpler, Kamela had priced all of the figurines at Rs.8.00. Variable operating costs amounted to an average of Rs.6.00 per unit. To produce the order, Kamela and Jensen would have to rent industrial facilities for a month, which would cost them Rs.4,000.

Required
Calculate KamelaJens operating breakeven point. (Marks 1)
Calculate KamelaJens EBIT on the department store order. (Marks 2)
If Molly renegotiates the contract at a price of Rs.10.00 per figurine, what will the EBIT be? (Marks 2)
If the store refuses to pay more than Rs.8.00 per unit but is willing to negotiate quantity, what quantity of figurines will result in an EBIT of Rs.4,000? (Marks 2)
At this time, KamelaJens come in 15 different varieties. Whereas the average variable cost per unit is Rs.6.00, the actual cost varies from unit to unit. What recommendation would you have for Kamela and Jensen with regard to pricing and/or the numbers and types of units that they offer for sale?

Answer rating: 100% (QA)

Ans a For break even point 8x 6x 4000 2x 4000 x 2000 Therefore Kamelajens break even point is 200... View the full answer