HW2-BreakEven-ProductDesign-solution

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

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
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)
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

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)...
View Full Document

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.

Ask a homework question - tutors are online