{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

solutions

# solutions - Question 4 The Evergreen Fertilizer Company...

This preview shows pages 1–3. Sign up to view the full content.

Question 4: The Evergreen Fertilizer Company produces fertilizer. The company's fixed monthly cost is \$25,000, and its variable cost per pound of fertilizer is \$0.15. Evergreen sells the fertilizer for \$0.40 per pound. Determine the monthly break-even volume for the company. Break Even Volume = Fixed cost / (Selling price per pound – Variable cost per pound) = 25000/(0.40-0.15)= 100,000 Pounds Question 12: If the Evergreen Fertilizer Company in problem 4 changes the price of its fertilizer from \$0.40 per pound to \$0.60 per pound, what effect will the change have on the break-even volume? Break Even Volume = Fixed cost / (Selling price per pound – Variable cost per pound) = 25000/(0.60-0.15)= 55,555.56 Pounds The break even volume will reduce. Question 18: The General Store at State University is an auxiliary bookstore located near the dormitories sells academic supplies, toiletries, sweatshirts and T-shirts, magazines, packaged food items, canned soft drinks and fruit drinks. The manager of the store has noticed that several pizza deli services near campus make frequent deliveries. As such, the manager is considering selling pi the store. She could buy premade frozen pizzas and heat them in an oven. The cost of the oven freezer would be \$27,000. The frozen pizzas cost \$3.75 each to buy from a distributor and to pare (including labor and a box). To be competitive with the local delivery services, the man: believes she should sell the pizzas for \$8.95 apiece. The manager needs to write up a propos the university's director of auxiliary services. a. Determine how many pizzas would have to be sold to break even. Break Even Volume = Fixed cost / (Selling price – Variable cost) =27000/(8.95-3.75) =5192.31 Pizzas b. If the General Store sells 20 pizzas per day, how many days would it take to break even? No. of days =5192.31/20 = 259.62 days c. The manager of the store anticipates that once the local pizza delivery services start losing business they will react by cutting prices. If after a month (30 days) the manager has to lower the price of a pizza to \$7.95 to keep demand at 20 pizzas per day, as she expects, what will the new break-even point be, and how long will it take the store to break even? Number of Pizzas sold in first 30 days = 30*20=600 Contribution per pizza for the first 30 days = (8.95-3.75) =\$5.20 Total Contribution during first 30 days = 600*5.20=\$3120

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Remaining fixed cost to be recovered = 27000-3120 = \$23880 Break Even Volume for remaining fixed cost = Fixed cost / (Selling price – Variable cost) =23880/(7.95-3.75) =5685.71 Pizzas Number of days = 5685.71/20=284.29 So it will take a total of 30+284.29 days i.e. 314.29 days to fully break even. Question 20:
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 8

solutions - Question 4 The Evergreen Fertilizer Company...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online