Roman and Clive have a plan to manufacture barbeque grills. They are writing their business plan for Roman & Clive Grills in order to get investors and have put together the following costs:
- Rent: $10,000/month
- Packaging: $7 per grill
- Equipment: $75,000
- Staff Salaries: $12,000/month
- Assembly and manufacturing labor: $16/hour
- Raw materials: $100/grill
- Utilities: $1,000/month
- Outsourced painting: $30/grill
- Insurance: $5,000/year
- Scrap rate on raw materials and packaging: 1%
- Time to manufacture and assemble 1 grill: 90 minutes
a. What are RC Grills fixed costs?
b. What are RC Grills total variable costs per unit?
c. Comparable grills are priced at $300. If RC Grills matches that price and hopes to breakeven their first year, how many do they need to make and sell? (Breakeven point is where Fixed costs + variable costs = revenue, meaning the point where revenue covers exactly both fixed and variable costs with no profit.)
d. Assuming their workers work a typical 40 hours work week and are allowed three weeks off for vacation and holidays, how many assemblers must they hire?