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Ariadne Original Estimate Ariadne Revised Estimate 2 Ariadne Revised Estimate 3 Estimated Total Annual ...

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Accounting

Ariadne
Original Estimate
Ariadne
Revised Estimate 2
Ariadne
Revised Estimate 3
Estimated Total Annual
Sales Volume (cases)
120,000
120,000
125,000
Estimated Selling Price per case ($)
28.00
60,000 cases @ $29.88;
60,000 cases
@ $28.39
62,500 cases @ $29.88;
62,500 cases
@ $28.39
Total Fixed Costs ($)
750,000
750,000
750,000
Average Variable Cost per case excluding
communications ($)
7.50
7.50
7.50
Average Variable Cost per case
communications ($)
5.00
5.00
6.00
Total Average Variable
Cost per case ($)
12.50
12.50
$13.50
Record your revised profit and loss estimate for Ariadne B in the following chart:
Ariadne Original
Estimate
Ariadne Revised
Estimate 2
Ariadne Revised
Estimate 3
Sales Revenue ($)
3,360,000
3,496,200
Total Fixed Costs ($)
750,000
750,000
Total Variable Costs ($)
1,500,000
1,500,000
Net Profit ($)
1,110,000
1,246,200
Profit Margin (%)
33.0
35.6
2. Based on the above financial estimates, should support spending on communications for Ariadne be set at $5.00 per case or $6.00 per case?

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