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Finance & Accounting
Pages 4 (1004 words)
MALIBU SYSTEMS Inc. CASE STUDY (Name) (University) Part 1: Invest in ZEON hard drives or Memory chips The profit margin for each ZEON hard drive is determined by the formula Selling price minus the cost of producing each hard drive (Eisen 2007, 34). The selling price for each hard drive $154.00 The cost involved in producing each ZEON hard drive $67.55 The profit margin for each ZEON hard drive (154.00 – 67.55) = $86.45 Since Malibu Systems Inc.
$120 + $6.50 = $126.50 * 500 = $63,250 (Total cost) Total sales for purchased hard drives = 500 * $154.00 = $77,000 Total profit generated from purchased hard drives = $77,000 - $63,250 = $13,750 If Malibu Systems Inc. concentrates on the ZEON hard drives market, it could make an annual profit of ($13,750 + $216,125) $229,875. By producing manufacture memory chips, Malibu Systems Inc. can sell up to 3,500 memory chips per year at a price of $65.00. Annual sales - $227,500. Production costs – $62.25 * 3,500 = $217,875 Profit generated from production and sales of memory chips – ($227,500 – $217,875) = $9,625 Production of memory chips for Malibu Systems Inc. is not a brilliant idea to invest in because it gives lower profit margins than production of Zeon hard drives. Part 2: Contribution Margin per Unit for; Purchased ZEON hard drives Contribution The formula for determining contribution is the sale price minus variable costs (Eisen 2007, 35). ...
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