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

- What is the annual breakeven production
__quantity__(use above data, show work)?

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

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

- 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)?

- 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