Answer:
a. 186 units
b. 156 units
c. 232 units
d. $370,000
Explanation:
a. Calculation to determine the break-even point for the new line of guitars if the retail price is $349
Using this formula
Break-even point quantity = Fixed cost / Unit price – Unit variable cost
Let plug in the formula
Break-even point quantity = ($14,000 + $4,000 + $20,000) / $349 – ($25 + $120)
Break-even point quantity= $38,000 / $349 - $145
Break-even point quantity= $38,000 / $204
Break-even point quantity= 186.27
Break-even point quantity= 186 units
Therefore the break-even point for the new line of guitars if the retail price is $349 will be 186 units
b. Calculation to determine the break-even point for the new line of guitars if the retail price is $389
Break-even point quantity = ($14,000 + $4,000 + $20,000) / $389 – ($25 + $120)
Break-even point quantity= $38,000 / $389 - $145
Break-even point quantity= $38,000 / $244= 155.74
Break-even point quantity = 156 units (Approximately)
Therefore Therefore the break-even point for the new line of guitars if the retail price is $389 will be 156 units
c. Calculation to determine the break-even point for the new line of guitars if the retail price is $309
Break-even point quantity=($14,000+$4,000+$20,000)/$309 – ($25 + $120)
Break-even point quantity= $38,000 / $309 - $145
Break-even point quantity= $38,000 / $164
Break-even point quantity= 231.71
Break-even point quantity = 232 units (Approximately)
Therefore the break-even point for the new line of guitars if the retail price is $309 will be 232 units
d. Calculation to determine what will its profit be
if Washburn achieves the sales target of 2,000 units at the $349 retail price
Using this formula
Profit = Total revenue – Total cost
Profit= (P x Q) – [FC + (UVC x Q)]
Let plug in the formula
Profit= ($349 x 2000) – [$38,000 + ($145 x 2,000)]
Profit= $698,000 – $328,000
Profit= $370,000
Therefore the profit will be $370,000
