1. Given : Data below from a VA study Current Selling Price /Unit = $95

PLEASE FIND BELOW ANSWER TO FIRST QUESTION :

Scenario after value analysis study :

Revised direct cost

= Initial cost – material cost reduction – labor cost reduction + cost increase in sales promotion

= $ 58 – $2.5 – $3 + $1.5

= $54 / unit

Other fixed costs incurred

= Cost of value analysis team + Cost of marketing team

= $120 + $100

= $220

New price for first 10,000 units = $ 110 / unit

Hence, Profit for first 10,000 units

= Total revenue – Total Direct cost – Other fixed cost

= Price / unit x Number of units – Revised direct cost/unit x number of units – Other fixed cost

= 110 x 10000 – 54 x 10000 – 220

= $560,000 – $220

= $559780

Price for next 5000 units ( i.e. 10001 to 15000 th unit ) = $ 100 / unit

Price for subsequent 5000 units = $105/unit

Therefore , average price for next 10,000 units ( i.e. 10,001 th till 20,000^th unit) = $102.5/ unit

Average direct cost per unit for next 10,000 units = $54 / unit

Therefore , Profit for next 10,000 units with new price = ( $102.5 – $54) x 10000 = $ 485,000

Let the sales volume to realize $0.75 million or $750,000 profit = V

It is established that profit from first 10,000 units = $559780

Therefore, balance profit to be earned = $750,000 – $559780 = $190220

Profit earned per unit ( for quantity between 10,001 – 15,000 units )

= Sales price / unit – Direct cost / unit

= $100/unit – $54/unit

= $46/unit

Hence balance quantity to be produced above 10,000 to earn balance profit of $190220

= 190220/46 = 4135.21 ( 4135 rounded to nearest whole number)

Thus total quantity to be produced to earn a total profit of $0.75 million

= 10,000 + 4135

= 14135

Therefore V = 14135