a. The computation of Mollycaits' operating break-even point is <em>2,473 units</em> ($4,500/$1.82).
b. The calculation of Mollycaits' EBIT on the department store order is <em>$812.40</em> ($9,500 - $8,688).
c. If department stores' price were $9.51, the EBIT will be <em>$5,387</em> ($14,075 - $8,688).
Note that for (b) and (c), the fixed cost is not considered.
d. Without paying more than $7.69, the quantity that will result in an EBIT of $3,700 is <em>4,505 units</em> ($4,500 + $3,700)/$1.82
e. Varieties of Mollycaits = 15 with variable cost of $5.87
f. The recommendation to Molly and Caitlin with regard to pricing and varieties to offer is that, while the company can varieties to suit the needs of customers, it must ensure that it does not price them below $5.87, its operating cost.
Data and Calculations:
<u>Special contract</u>:
Units of figurines offered = 1,480
Sales value of offer = $9,500
Selling price per unit = $6.42 ($9,500/1,480)
Variable operating cost = $5.87
Contribution margin per unit = $0.55 ($6.42 - $5.97)
<u>Normal business</u>:
Estimated average price per unit = $7.69
Variable operating cost = $5.87
Contribution margin per unit based on average price = $1.82 ($7.69 - $5.87)
Fixed cost per month = $4,500
Thus, Molly and Caitlin can offer various types of figurine, but they must sell at least 2,473 units to break-even.
Learn more about computing break-even points here: brainly.com/question/9212451
