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Question

Swift Start is a gas tank additive guaranteed to put a "tiger in your tank", as Exxon commercials once

boasted. Its production has the following fixed and variable costs. It is priced at $5.00 per gallon to begin with:


           Fixed costs (per year)                           Variable Costs per gallon

           Rent                            $12000                       Volatile Fluids  $1.00

           Utilities                          1800            Mfg. Labor                      .10

           Managerial salaries       16800            Advertising                      .25

           Computer services        19200            Packaging                     .15

           Other fixed expense        1080            Inert ingredients               .50   

                       Total fixed        $50880                        Total                $2.00


  1. What is the annual breakeven production quantity (use above data, show work)?




  1. What revenue would the sale of the breakeven quantity for $5 per gallon generate?



  1. How many gallons (at $5 each) must be sold to earn $100000 above breakeven? (show your calculations)




  1. Management believes that only 25000 gallons can be sold in a year. What price per gallon needs to be charged to pay the fixed costs and earn $100000 more (variable costs remain as initially given)(show your work)?





  1. What is the Contribution Margin Ratio (CMR) if the price per gallon is $7.00





Top Answer

i)breakeven point quantity=16,960 units ii)Revenue for breakeven quantity=$84,800... View the full answer

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