Roman and Clive have a plan to manufacture barbeque grills. They are writing their business plan for RC 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
- What are RC Grills fixed costs?
- What are RC Grills total costs?
- 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?
- 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?
- Clive discovers that if they add a rotisserie unit, labor increases to 2 hours each, the cost of the rotisserie unit is another $20 and the sales price goes to $350. There is no additional scrap cost as defective units may be returned to the manufacturer, nor are there any additional equipment costs. Should they add this unit?
