The selling price of our product is $40 per unit. The variable cost is $25 per unit. Total fixed costs are $45,000 per month. a. b. C. d. f. If we produce and sell 8,000 units next month, what is our Operating Income? If we produce and sell 2,800 units next month, what is our Operating Income? What is our break-even quantity for the month? If our marketing department indicates we can't sell more than 2,800 units, should we shut down? Why or why not? Draw a Cost-Volume-Profit chart using this information. This shows dollars as a function of units for Total Revenues and for Total Costs (on the same axes). Be sure to label everything relevant. Now, assume we can reduce variable costs by $1/unit, but increase fixed costs by $5,000/month. ii. iii. iv. What is the break-even quantity? Should we make this change if we plan to produce and sell 8,000 units next month? Why or why not? Should we make this change if we plan to produce and sell 4,000 units next month? Why or why not? What does this example reveal about fixed costs and high volume?
The selling price of our product is $40 per unit. The variable cost is $25 per unit. Total fixed costs are $45,000 per month. a. b. C. d. f. If we produce and sell 8,000 units next month, what is our Operating Income? If we produce and sell 2,800 units next month, what is our Operating Income? What is our break-even quantity for the month? If our marketing department indicates we can't sell more than 2,800 units, should we shut down? Why or why not? Draw a Cost-Volume-Profit chart using this information. This shows dollars as a function of units for Total Revenues and for Total Costs (on the same axes). Be sure to label everything relevant. Now, assume we can reduce variable costs by $1/unit, but increase fixed costs by $5,000/month. ii. iii. iv. What is the break-even quantity? Should we make this change if we plan to produce and sell 8,000 units next month? Why or why not? Should we make this change if we plan to produce and sell 4,000 units next month? Why or why not? What does this example reveal about fixed costs and high volume?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
part f only
Transcribed Image Text:The selling price of our product is $40 per unit. The variable cost is $25 per unit. Total
fixed costs are $45,000 per month.
a.
b.
C.
d.
f.
If we produce and sell 8,000 units next month, what is our Operating Income?
If we produce and sell 2,800 units next month, what is our Operating Income?
What is our break-even quantity for the month?
If our marketing department indicates we can't sell more than 2,800 units, should
we shut down? Why or why not?
Draw a Cost-Volume-Profit chart using this information. This shows dollars as a
function of units for Total Revenues and for Total Costs (on the same axes). Be
sure to label everything relevant.
Now, assume we can reduce variable costs by $1/unit, but increase fixed costs by
$5,000/month.
ii.
iii.
iv.
What is the break-even quantity?
Should we make this change if we plan to produce and sell 8,000 units
next month? Why or why not?
Should we make this change if we plan to produce and sell 4,000 units
next month? Why or why not?
What does this example reveal about fixed costs and high volume?
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