HW2-BreakEven-ProductDesign-solution

# HW2-BreakEven-ProductDesign-solution - 3 If a firm has...

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HW#2 1. Ch3 - #12 a. Breakeven Quantity = Fixed Cost / (Selling Price – Variable Cost) Breakeven quantity = 40,000/(25-20) = 8,000 mops. (2 points) (1 point) b. Contribution to Profit = Total revenue – Total Cost = SP(Q) – [FC-VC(Q)] = \$250,000 - \$240,000 = \$10,000 (2 points) 2. What is the break-even volume given insurance costs of \$25,000, materials costs of \$4 per unit, taxes of \$10,000, labor costs of \$30 per unit, and a selling price of \$60? (2 points) Ans: 1346 units (Q BE = F/(SP – VC) = (\$25,000 + \$10,000)/(\$60 – (\$30 + \$4.00)) = 1346)
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Unformatted text preview: 3. If a firm has fixed costs of \$250,000, a market-based selling price of \$50 per unit, and it expects to sell 20,000 units, 1)how low must its variable costs be to break even? (2points) Ans: \$37.50 (VC= SP – F/ Q BE ) = \$50 - \$250,000 /20,000)= \$37.50/unit) 2) Assume the variable cost is\$35, what is the selling price to break even? (2 points) Ans: \$47.5 (SP=VC+ F/ Q BE) = \$30+ \$250,000 /20,000= \$47.50/unit)...
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## This note was uploaded on 10/17/2011 for the course MNGT 368 taught by Professor Curthurds during the Spring '08 term at Nicholls State.

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