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Unformatted text preview: LG1 12–6 Breakeven analysis Molly Jasper and her sister, Caitlin Peters, got into the novelties business almost by accident. Molly, a talented sculptor, often made little
figurines as gifts for friends. Occasionally, she and Caitlin would set up a booth
at a crafts fair and sell a few of the figurines along with jewelry that Caitlin
made. Little by little, demand for the figurines, now called Mollycaits, grew, and
the sisters began to reproduce some of the favorites in resin, using molds of the
originals. The day came when a buyer for a major department store offered them
a contract to produce 1,500 figurines of various designs for $10,000. Molly and
Caitlin realized that it was time to get down to business. To make bookkeeping
simpler, Molly had priced all of the figurines at $8.00. Variable operating costs
amounted to an average of $6.00 per unit. In order to produce the order, Molly
and Caitlin would have to rent industrial facilities for a month, which would
cost them $4,000.
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