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
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: