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# Big Star Condiments CaseBig Star Condiments produces salsa

### Customer Question

Big Star Condiments Case

Big Star Condiments produces salsa consumed primarily in North American restaurants. Given below is the projected income statement for the company for 2011.

 Sales (100,000 cases at \$6.50 per case) \$650,000 Cost of goods sold: Materials \$170,000 Labor \$205,000 Fixed manufacturing expenses \$40,000 Administrative and selling expenses: Delivery \$25,000 Commissions \$40,000 Advertising \$10,000 Travel \$5,000 Fixed administrative and selling expenses \$12,000 Total costs \$507,000 Net income before taxes \$143,000

Create a report answering the following questions:

• Complete the following table using a fully functional Microsoft Excel spreadsheet showing Marginal Revenue (MR), Marginal Cost (MC), Total Revenue (TR), Total Cost (TC), Total Variable Cost (TVC), Total Fixed Cost (TFC), and profits at all possible output levels.

 Price Quantity Total Revenue Total Variable Cost Total Fixed Cost Total Cost Profit \$8.00 65,000 \$7.75 75,000 \$7.50 80,000 \$7.25 90,000 \$7.00 100,000 \$6.75 115,000 \$6.50 120,000

• Using Excel, prepare a graph showing the breakeven point and any profit or loss at the current price of \$6.50. Explain to the Big Star management the implications of this analysis.

• What is the elasticity coefficient for each price between \$6.50 and \$7.50? Is the demand elastic or inelastic at these points?

• On the basis of your calculations and the information above, what recommendations would you make to Big Star Condiments in terms of pricing and output levels?

Create your report in a 2- to 3-page Microsoft Word document.

Submitted: 5 years ago.
Category: Homework
Expert:  getsetgo replied 5 years ago.