Question

Cox Electric makes electronic components and has estimated the following for a new design of one of its products: Fixed Cost = $3,000 Material cost per unit = $0.15 Labor cost per unit = $0.10 Revenue per unit = $0.65 Production Volume = 12,000 Per-unit material and labor cost together make up the variable cost per unit. Assuming that Cox Electric sells all it produces, build a spreadsheet model that calculates the profit by subtracting the fixed cost and total variable cost from total revenue, and answer the following questions.
a. Construct a one-way data table with production volume as the column input and profit as the output. Breakeven occurs when profit goes from a negative to a positive value; that is, breakeven is when total revenue = total cost, yielding a profit of zero. Vary production volume from 5,000 to 50,000 in increments of 5,000. In which interval of production volume does breakeven occur?
b. Use Goal Seek to find the exact breakeven point. Assign Set cell: equal to the location of profit, To value: = 0, and By changing cell: equal to the location of the production volume in your model.

Answer 1

Answer:

Total revenue = (revenue per unit)*(Production Volume)

Total Variable Cost = (Material cost per unit +Labor cost per unit)*(Production volume)

Total Cost = Total Variable Cost +Fixed Cost

Profit = Total revenue - Total Cost = (revenue per unit)*(Production Volume)- (Material cost per unit +Labor cost per unit)*(Production volume) - Fixed Cost

The product break even point is at 7500

The following spreadhseet shows the profit for production volume of 12,000

(Attached)