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CH07_f

# C how many chairs must the company sell to generate a

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Unformatted text preview: profit of the sales? c. How many chairs must the company sell to generate a total of \$5,000 net profits? VC \$20 FC \$10,000 P \$25 a. TC = (20 x 150) + 10,000 = 13,000 b. R = 25 x 150 = 3,750 P = 3,750 - 13,000 = (9,250) LOSS c. Q = (5,000 + 10,000) / (25 - 20) = 15,000 / 5 = 3,000 chairs 3. Break-even analysis: - The process to determine the production and sales for a zero profit - Break-even quantity in units = fixed costs/(price – variable cost per unit) - Price = (fixed costs/quantity) + variable cost per unit - Example: 7.2 A cinema sells tickets for \$5 per person. Each person buys on average \$10 of food and drinks. The cost of providing the service is estimated \$3 per person. The fixed cost of renting the movie is \$2,000. How many tickets must be sold to 1) Break-even; 2) have a profit of \$10,000, and assume 10% income tax? Pt \$5 Pf \$10 VC \$3 FC \$2,000 1. Q= 2,000 / (15 - 3) = 167 tickets 2. 10,000 = (15x - 3x - 2...
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