MasterPad

Masterpad produces one model of a table-tennis paddle, at a volume of 100,000. The selling price is €5.40 per
unit.
The production process is simple: the body is cut from a wooden plate, assembled with the handle, and finally
covered with rubber sheets. Materials requirements are indicated in the table below.

Quantity Costs
Wood (sqm) 0.05 8.00 €/sqm
Rubber (sqm) 0.10 7.00 €/sqm
Other components (kits) 1 0.20 €/kit
Labor time (mn) 3.00

Production costs amount to €62,000 for the production wages, €70,000 for the depreciation of machines and
equipment, and €34,000 for other production costs (energy, maintenance, etc.).
The company spends €112,000 in advertising and selling expenses. In addition, a commission is paid to the
sales representatives: 2% of sales revenues. Finally, administrative expenses amount to €99,000.
1. What is the cost a paddle?
2. What is the profit if Masterpad sells 100,000 units?
3. What is the minimum volume of activity to have a profit? (to break even)
4. What is the profit for 150,000 paddles?
5. How many paddles to reach a profit of € 50,000?
6. What are the profit and BEP if direct materials costs are decreased to €1.20 per unit?
7. Increasing the advertising expenses by € 50,000 will allow to sell 120,000 paddles. What will the profit be?
8. Decreasing the price to € 5.20 will allow to sell 120,000 paddles. What will the profit be?

The company decides to launch a new model, made in plastic, mainly to address training needs. The volume
is 60,000 units, sold € 4.00 per unit. Materials requirements for this model are indicated in the table below.

Quantity Costs
Plastic (kg) 0.10 6.00 €/kg
Rubber (sqm) 0.10 7.00 €/sqm
Other components (kits) 1 0.20 €/kit
Labor time (mn) 2.00

This model generates the additional specific production costs: €28,000 in production wages, and €32,000 for
the depreciation of machines and equipment.
Except for sales representatives commissions (at 2%), all other costs are not affected by this new product and
remain the same.
9. What is the profit for the company? for each product?
10. What is the unit cost of each racket model?
11. What is the break-even point for each product?
Pascal Langevin