Answer:
a.The profit is 40000 when sales are 10000 units.
b.Break-even point quantity and revenue=6000
c.When profits are at P9,000, sales are 6900
d.Fixed cost must decrease
e.The volume of sales to cover the fixed cost is 1500 units
f.If the firm want to break-even at a lower number of units, then the price will rice
Step-by-step explanation:
a.Profit is the difference between sales and cost
Profit= price* sales -((Variable cost * sales) +Fixed cost)
Profit when sales are 10000 units must be
P=40*10000-((30*10000)+60000)
P=400000-(300000+60000)=400000-360000
Profit=40000
The profit is 40000 when sales are 10000 units.
b.The break-even point quantity and revenue is when profit=0
So, Profit= price* sales -((Variable cost * sales) +Fixed cost)
If profit is 0, then (Variable cost * sales) +Fixed cost =price* sales
30x +60000=40x
10x=60000
x=60000/10=6000
Break-even point quantity and revenue=6000
c. Profit= price* sales -((Variable cost * sales) +Fixed cost)
9000=40x -(30x +60000)=40x -30x -60000)
9000 +60000=40x-30x
69000=10x
x=6900 units
d. break even at sales volume of 500 units
(Variable cost * sales) +Fixed cost =price* sales
30*500+FC=40*500
1500+FC=2000
FC=2000-1500
FC=500 Fixed cost must decrease
e.The volume of sales to cover the fixed cost
To only cover fixed cost, sales have to be 60000
Fixed cost =price* sales
Sales=Fixed cost/price
Sales 60000/40=1500 units
f. If the firm want to break-even at a lower number of units, then the price will rice
Remember that break-even formula is
(Variable cost * sales) +Fixed cost =price* sales
Variable an fixed cost remain constant, if sales go down, then price must go up.
