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Sockerville machine shop fabricates polished steel casings. They currently sell 9,000 casings at a selling price

of $80. They have the following cost structure:


Variable costs per unit

$30

Fixed costs

$300,000

Required (each requirement is independent):


a.    What is the breakeven point in units?


Break-even point in units:



b.    Suppose that if they decrease their price to $70, they could increase sales by 20%. What would the change in profit be if they decrease their price to $70? 


Change in profit if price is $70

(be sure to say whether profit increases or decreases):



c.    What is the minimum price that Sockerville would be willing to charge in order to achieve an increase in unit sales of 20% (round to the nearest cent)?


Minimum price for increase in unit sales of 20%:



d.    Suppose that Sockerville can purchase a machine that would increase fixed costs to $400,000 and decrease unit variable costs to $25 per unit. At what level of production and sales would Sockerville be indifferent between the old machine and the new machine?


Level of production and sales (in units):



Show computations here:

Top Answer

a. 6000 units b. $16000 decrease c. $71.67 per unit d. At... View the full answer

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