business game
TRANSCRIPT
Decision Making Game
Option1 (Rent Machines)Cost per cleaning Service (2 Hours)Direct Materials AED2 Direct Labor = 8 AED/hour X 2 Hours AED 16Variable OH AED 2Variable Selling Cost AED 5
Monthly Fixed Cost AED 10,000 Machine Rent Cost AED 15,000
Selling Price AED 70Variable Cost AED 25Contribution Margin AED 45
Option2 (without Machines)
AED 12 AED 16 AED 3 AED 9
AED 10,000 AED 0
AED 70 AED 40 AED 30
Fantastic Cleaning Co.15 Employees - AED 8/hour (Maximum 40 hours a week)
Option1 (Rent Cleaning Machines)
Direct Materials = AED 2Direct Labor = 8 AED/hour X 2 Hours = AED 16Variable OH = AED 2Selling Cost = AED 5
Fixed Cost = AED 10,000 Machine Rent Cost = AED 15,000/ month
Selling Price = AED 70Variable Cost = AED 25Contribution Margin = AED 45
Breakeven (Profit Required = AED 20,000)
Sales = VC + FC + Required Profit
70 X Cleaning Services = 25 X Cleaning Services + 25,000 + 20,000 45 X Cleaning Services = 45,000 Cleaning Services = 1000
Option2 (without Cleaning Machines)
Direct Materials = AED 12Direct Labor = 8 AED/hour X 2 Hours = AED 16Variable OH = AED 3Selling Cost = AED 9
Fixed Cost = AED 10,000 Machine Rent Cost = 0
Selling Price = AED 70Variable Cost = AED 40Contribution Margin = AED 30
Breakeven (Profit Required = AED 20,000)
Sales = VC + FC + Required Profit
70 X Cleaning Services = 40 X Cleaning Services + 10,000 + 20,000 30 X Cleaning Services = 30,000 Cleaning Services = 1000
Option1 (Rent Cleaning Machines)
Direct Materials = AED 2Direct Labor = 8 AED/hour X 2 Hours = AED 16Variable OH = AED 2Selling Cost = AED 5
Fixed Cost = AED 10,000 Machine Rent Cost = AED 15,000/ month
Breakeven - Cleaning Services = 1000
Option2 (without Cleaning Machines)
Direct Materials = AED 12Direct Labor = 8 AED/hour X 2 Hours = AED 16Variable OH = AED 3Selling Cost = AED 9
Fixed Cost = AED 10,000 Machine Rent Cost = AED 0
Breakeven - Cleaning Services = 1000
Option1 (Rent Cleaning Machines)
Direct Materials = AED 2Direct Labor = 8 AED/hour X 2 Hours = AED 16Variable OH = AED 2Selling Cost = AED 5
Monthly Fixed Cost = AED 10,000 Machine Rent Cost = AED 15,000/ month
Selling Price = AED 70Variable Cost = AED 25Contribution Margin = AED 45
Profit = (45 X 800) – 25,000 = AED 11,000
Option2 (without Cleaning Machines)
Direct Materials = AED 12Direct Labor = 8 AED/hour X 2 Hours = AED 16Variable OH = AED 3Selling Cost = AED 9
Monthly Fixed Cost = AED 10,000 Machine Rent Cost = AED 0
Selling Price = AED 70Variable Cost = AED 40Contribution Margin = AED 30
Profit = (30 X 800) – 10,000 = AED 14,000
+ AED 11,000
Month2: # of Cleaning Services =
Option1 (Rent Cleaning Machines)
Direct Materials = AED 2Direct Labor = 8 AED/hour X 2 Hours = AED 16Variable OH = AED 2Selling Cost = AED 5
Monthly Fixed Cost = AED 10,000 Machine Rent Cost = AED 15,000/ month
Selling Price = AED 70Variable Cost = AED 25Contribution Margin = AED 45
Profit = (45 X 1250) – 25,000 = AED 31,250
Option2 (without Cleaning Machines)
Direct Materials = AED 12Direct Labor = 8 AED/hour X 2 Hours = AED 16Variable OH = AED 3Selling Cost = AED 9
Monthly Fixed Cost = AED 10,000 Machine Rent Cost = AED 0
Selling Price = AED 70Variable Cost = AED 40Contribution Margin = AED 30
Profit = (30 X 1250) – 10,000 = AED 27,500
+ AED 11,000
Month2: # of Cleaning Services =
+ AED 31,250
.comOption1 (Rent Machines)
Direct Materials = AED 2Direct Labor = AED 16Variable OH = AED 2Selling Cost = AED 5
Selling Price = AED 70Variable Cost = AED 25Contribution Margin = AED 45
Commission Rate (25%)Minimum Price =
Price 38 = Profit (1,200 to 1,400) Price 43 = Profit (1,100 to 1,600) Price 46 = Profit (800 to 1800)
Option2 (without Machines)
Direct Materials = AED 12Direct Labor = AED 16Variable OH = AED 3Selling Cost = AED 9
Selling Price = AED 70Variable Cost = AED 40Contribution Margin = AED 30
Commission Rate (25%)Minimum Price =
Price 38 = LossPrice 43 = Profit (600 - 1,000)Price 46 = Profit (400 – 1400)
+ AED 1,400+ AED 11,000 + AED 31,250
.comOption1 (Rent Machines)
Direct Materials = AED 2Direct Labor = AED 16Variable OH = AED 2Selling Cost = AED 5
Selling Price = AED 70Variable Cost = AED 25Contribution Margin = AED 45
Commission Rate (25%)Minimum Price =
Price 38 = Profit 1,300Price 43 = Profit 1,400Price 46 = Profit 900
Option2 (without Machines)
Direct Materials = AED 12Direct Labor = AED 16Variable OH = AED 3Selling Cost = AED 9
Selling Price = AED 70Variable Cost = AED 40Contribution Margin = AED 30
Commission Rate (25%)Minimum Price =
Price 38 = LossPrice 43 = Profit 900Price 46 = Profit 1,300
+ AED 1,400+ AED 11,000 + AED 31,250
Direct Materials Saving for Bulk order
+ AED 1,400+ AED 11,000 + AED 31,250
AED 1500
Fantastic Cleaning Co.
OtherCleaning Company
+ 800
Advertising Strategy
+ AED 1,400+ AED 11,000 + AED 31,250
Fantastic Cleaning Co.
Other Cleaning Company
AED 5,500 AED 6,250
AED 6,500 AED 5,250
+ ?+ 800
+ AED 1,400+ AED 11,000 + AED 31,250
Fantastic Cleaning Co.
Total Profit =
+ 800 + ?
