1.

If the company had Dropped 103 as on January1, 2004, what effect would that action have
had on the $158,000 profit of first six months of 2004?

Answer:
Total Revenue of the company calculated as below
Total revenue including 103 21382
Revenue of 103   5202
Total revenue excluding 103 16180

Total Variable costs of 103

In
Variable costs of 103 thousands
Direct labor   1341
Compensation Insurance 88
Materials     946
Power     59
supplies     68
Repairs     20
other income   -10
Total Variable costs of 103 2512

Total costs excluding 103

Total costs including 103 21224
Total Variable costs of 103 2512
Total costs excluding 103 18712

Net loss after removing 103

Total revenue excluding 103 16180
Total costs excluding 103 18712
Total loss     -2532
Note: All the values are in thousands

2. In January 2005, should the company reduce the price of product 101 from $9.41 to $8.64?
Answer:
The change in revenue for the reduction of price of product 101 is shown below

  unit price No of units sold Total revenue

Revenue with the old price $ 9.41 $ 750,000.00 $ 7,057,500.00
Revenue with the new price $ 8.64 $ 1,000,000.00 $ 8,640,000.00
Increase in Revenue $ 1,582,500.00

There is an increase in revenue of $1,582,500

The change in variable costs (materials and supplies costs increase by 5%) of the product 101 is shown
below

Old Variable costs of

101 New Variable costs of 101
Variable costs
unit cost for cost for
costs 750000 units unit costs 1000000 units
Direct labor 2.3282 1746 2.3282 2328
Compensation Insurance 0.1481 111 0.1481 148
Materials   1.3766 1032 1.3766 1445 material cost increase by 5%
power   0.0403 30 0.0403 40
supplies   0.0941 71 0.0941 99 supplies cost increase by 5%
Repairs   0.0319 24 0.0319 32
other income 0.0184 14 0.0184 18
Total Variable costs of
101 3028 4111
Change in variable cost -1083
Note: all the costs in thousands

Total Increase in variable costs = -108300

Total increase in profit = total increase in profit –total increase in costs
=1582500-108300 = 499565

Company should reduce the price because Contribution margin for 101 is high at $8.64

3. What is the Hilton most profitable product?

Answer:

product product product

  101 102 103
Revenue     9279 6900 5202
Variable costs        
Direct labor   2321 1619 1341
Compensation Insurance     148 115 88
Materials     1372 1251 946
power     40 66 59
supplies     94 126 68
Repairs     32 40 20
other income   18 14 -10
Total Variable costs     4025 3231 2512
Contribution margin     5254 3669 2690
total units sold   996.859 712.102 501.276
Contribution margin/unit   5.27 5.15 5.37
Note: Data taken from exhibit 4
Hilton most profitable product is product 103 by considering the variable costs and per unit contribution
margin.

4. What appears to have caused the return to profitable operations in first six months of 2004?
Answer:
Sales of the product 102 is noted as 6900 for the first six months of the 2004 which is 70% of the total
sales of 2003 (9977).This increase in demand for the product 102 caused profitable operations and also
Weston changes to the marketing and productions based on the monthly statements reduced the costs.