Problems Module 4.docx - Tabitha L Dillay BUS 3710-A3...

Tabitha L Dillay
BUS 3710-A3
Problems (Chapter 5) Due: Friday
2.) The Hartnett Corporation manufactures baseball bats with Pudge Rodriguez’s
autograph stamped on them. Each bat sells for $35and has a variable cost of $22.
There are $97,500 in fixed costs involved in the production process.
a. Compute the break-even point in units
BE(Break-Even) = 97500 / 35 - 22 = 7500 units
b. Find the sales (in units) needed to earn a profit of $262,500.
97500 + 262500 / 35 - 22 = 360000 / 13 = 27693 Units
5.) Eaton Tool Company has fixed costs of $255,00, sells it’s units for $66, and has
variable costs of $36 per unit.
a. Compute the break-even point
BE = ($255,000) / ($66 - $36) = 8,500. The Break-even point is 8,500 units.
b. Ms. Eaton comes up with a new plan to cut fixed costs to $200,000. However,
more labor will now be required, which will increase the variable costs per unit to
$39. The sales price will remain at $66. What is the new break-even point?
BE = ($200,000) / ($66 - $39) = 7,407. The Break-even point is 7,407 units.
c. Under the new plan, what is likely to happen to profitability at very high-volume
levels (compared to the old plan)?