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Assumptions

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ASSUMPTIONS

Perfect Plastics, Inc. will manufacture utensil under contract for $0.60 per unit.
$10,500 is due in August on the production mould.
Monthly administrative expenses total $3,750 once production has started.
Perfect Plastics would not begin production without a 50% deposit and the remainder is due before any units would be released for sale.
Using the single-cavity mould, monthly production capacity is about 40,000 units.
Ken wishes to maintain a minimum of 10,000 units inventory; however, if inventory exceeds 10,000 units, warehouse space would have to be rented at a cost of $200 per month. The warehouse space has a capacity of 35,000 units and can be leased on a monthly basis; no annual lease is required. Lease payments are due the month following the actual lease.
Perfect Plastics requires production runs of at least 5,000 units.
Ken's single cavity mould could be obsolete after producing only 162,000 units if he decided to buy the new two-cavity mould.
Ken's accountant suggested that a depreciation charge of $0.125 per unit be used in pro-forma statements to account for wear and tear and absolescence of the mould.
A combined depreciation charge of $0.015 per unit was recommended for the package mould and tool and dies. Also, $10 a month was allowed for depreciation of office equipment, which was to be considered an administrative expense.
Products will be packaged the same month that they are produced for a cost of $0.375 per unit (material cost included).
Kitchen Helper Inc. will pay shipping expenses $0.075 per unit, incurred when units are sold.
The wholesale price by Kitchen Helper to the distributors is $1.58 per unit, net 30 days.
Ken believes that 50% of receipts will be paid the month following the sale and the remainder within the second month.
500 units will be given away monthly for the first four months for promotional

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